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Why Do Small Businesses Need a Registered Agent?
Not sure what "registered agent" means? We've got you covered.
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When you start a business, you’ll have a detailed checklist with items to cross off. For example, before opening up shop, you must choose a business name, potentially file for a “doing business as” (DBA) name, register a trademark, apply for the correct business licenses and find a registered agent.
If you’re unfamiliar with the term “registered agent,” it’s time to get up to speed with a registered agent’s role in your business and learn why you need one.
What is a registered agent?
A registered agent is an individual or business that acts as a state’s means of communicating with a corporation or limited liability company (LLC). Your registered agent accepts legal and official documents for your business, including franchise tax forms, annual reports, renewal reminders and legal notices ranging from court summons to lawsuit paperwork.
Who needs a registered agent?
Any business that’s registered with the state needs a registered agent. Those businesses include corporations, LLCs, limited partnerships and limited liability partnerships. Sole proprietorships and general partnerships aren’t required to have a registered agent because they are considered “common law” entity types.
What are the benefits of using a registered agent?
A registered agent is a valuable business resource. Here are some of the benefits a registered agent provides:
- Registered agents accept service of process: One of the most significant immediate benefits of working with a registered agent is gaining an extra layer of privacy. For example, you could be served legal documents if someone sues your company. Instead of this happening in front of customers and employees, potentially damaging your company’s reputation, a registered agent would step in to receive service-of-process documents on behalf of your business during any legal action. They take the legal documents, organize them and pass them on to you privately. This ensures your company maintains distance from legal action while staying on track with paperwork.
- Registered agents are a point of contact: Registered agents serve as helpful points of contact. A registered agent will forward legal documents and official notices to the business and report whether the legal entity is in good standing with the state. Using your registered agent’s address, you won’t have to worry about sifting through junk mail or exposing your personal address.
- Registered agents are your 9-5 replacement: If you work remotely in a different time zone or travel frequently, you won’t always be present during standard business hours. For an annual fee, a registered agent can ensure you receive all your documentation to meet deadlines and stay compliant.
- Registered agents allow you to scale your business beyond state lines: The law will enable you to be your own registered agent in your state, but once you want to do business in another state, you will need to hire a registered agent who lives in that state or is authorized to do business there.
Who can be a registered agent?
Typically, registered agents are individuals (corporate officers, directors, lawyers or certified public accountants) or third-party organizations.
A registered agent must:
- Have a physical street address within the state (a post office box is not accepted)
- Be available during general business hours
- Be a resident of the state
- Be 18 years or older (if an individual)
Can I be my own registered agent?
Some business owners opt to become their own registered agents to save money. However, when you serve as your own registered agent, uncertainties can arise, including the following:
- Being unsure of what physical address to designate
- Not knowing if you’ll be available during general business hours to receive specific documents
- Worrying about unexpected visitors dropping by your place of residence or business location
- Missing key deadlines for filing necessary paperwork
- Not being compliant with current state and federal regulations
Experts advise entrepreneurs to work alongside a third-party business registered agent. A third-party registered agent is reliable, understands what they’re doing and helps track your state’s legislative changes and requirements. Note that different states have various regulations on who can be a registered agent. Check with your state’s filing agency to ensure you’re meeting all requirements.
What happens if my business doesn’t have a registered agent?
If your business has registered as an LLC or a corporation, it must have a designated registered agent to comply with state law. Failing to maintain a registered agent can lead to trouble for your company, including penalties and revocation of your business’s legal status.
Instead of risking it all, be sure to add “designating a registered agent” to your entrepreneurial checklist early on. The peace of mind, extra privacy and added security will take you and your small business a long way.
Julie Thompson contributed to this article.
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