If you have been researching forming an LLC or Corporation, or your business is expanding to other states, you've probably been told that you need to name a Registered Agent. This may sound confusing, but it is actually very, very simple...
What is a Registered Agent?
A Registered Agent is primarily a person or company where a business entity such as a Corporation, Limited Liability Company, or other type of entity can be served with a lawsuit. This is called "Service of Process" or "SOP." Nearly every type of business filed with every state is required to have a registered agent located in that state and available during business hours to receive service of process.
Fun Fact: A "Registered Agent" is really just someone that sits around all day during business hours waiting for you to get sued.
What Else Does a Registered Agent Do?
In many states, the Registered Agent is the address where the state will send annual filing notices, franchise tax reports or other filings that your business entity may have to file from time to time depending on the laws of the state where it is registered. If your agent is doing their job, then they will forward these notices and reports to your company. An agent may also offer "compliance tools" such as "tax calendars" and automated filing reminder tools to assist you in keeping your corporation or LLC in good standing.
I was told I need a "Resident" Agent. Is a "Registered" Agent the same thing?
They are indeed the same thing. Registered Agents are also known as a "RAs", "Statutory Agents", or "Resident Agents", however most states just use the term "Registered Agent" - and many states that don't use this term yet are in the process of changing just as Nevada did on July 1, 2008.[1]
Why Do States Require Business Entities to Have a Registered Agent?
Imagine that you have a business and you know you are going to be sued... you first have to be served with that lawsuit. If you knew someone was looking for you to serve you, it may be tempting to just "hide out" so you would never be served - and thereby never be sued. Tempting to be sure, however if you put the shoe on the other foot, imagine if you had a legitimate lawsuit and could not find the defendant to sue them? This is why laws were enacted requiring registered agents, so lawsuits could be properly served.
I've heard that I can act as my own Registered Agent - If so, Why Would I Want someone else to be my Registered Agent?
"In many states you can act as your own registered agent. Of course you can also pull your own teeth, but I would recommend that you go to a dentist!" - Jennifer Reuting
There are some very compelling reasons that you would actually want to have a Registered Agent other than yourself. For example, imagine that you own a restaurant (Note: This exercise will be very easy if you own a restaurant), and someone wants to sue you alleging that they caught food poisoning in your restaurant. Would you really want law enforcement or other "official looking" individuals serving a food poisoning lawsuit in front of your waiting customers? Not to mention that even your employees might speculate and gossip about what is going on and you know how rumors in the workplace go.
"In many states you can act as your own registered agent. Of course you can also pull your own teeth, but I would recommend that you go to a dentist!" - Jennifer Reuting
If you have a Registered Agent, the lawsuit goes to that person or company, and nobody knows except for you, the agent, and any persons you delegate such as an attorney.
Another consideration is that if you are the Registered Agent for a business, that means that you have told the state that you are going to be at that address during business hours without exception. If it doesn't bother you that you won't be able to ever leave your address 180 days out of the year, during business hours, then you can save yourself approximately $99-$350 a year depending on which agent you select. Personally, for me its not worth $99 to be trapped in my place of business for a year, but your situation may be different.
If you have a Registered agent that is not yourself, you can actually LEAVE your address during business hours. For example, if you decide you want to go to a business meeting, lunch, or a movie, then you can actually go! Now doesn't that sound fun?
I am qualifying to do business in another state and I need a registered agent in that state. How do I find one?
If you have a Registered agent that is not yourself, you can actually LEAVE your address during business hours. For example, if you decide you want to go to a business meeting, lunch, or a movie, then you can actually go! Now doesn't that sound fun?
Most companies either just hire a commercial registered agent, or their attorney to act as registered agent. To find an agent, really all you need to do is Google "Registered Agent" and you will find a zillion companies that would all love to be your registered agent. There are companies that service just one or two states, and there are big National Registered Agent companies that service all 50 states.
You will also want to consider how long a registered agent company has been in business since I've known of a number of "fly by night" companies over the years that have just dissapeared without even telling their clients. If you want to see what happens to the entities of a Registered Agent that goes out of business, click here or here. Obviously, if sued, the business entity customers of these two firms might be looking at some problems... First, none of the entities these agents represent appear to be in good standing with the State. This makes it much easier for a plaintiff to pierce the corporate veil. Second, if sued, the customers of these agent firms probably would not even receive the service of process, and the plaintiff would probably win the case on a default judgment! I would definitely ask your prospective Registered Agent how long they have been in business and if possible, ask for references!
If you think that your business is going to be expanding nationally someday (be optomistic!), it might make sense to select one of the National Registered Agent companies. The "Big 4" National Registered Agent companies are Corporation Service Company (CSC), CT, InCorp, and National Registered Agents, Inc. (NRAI). These four companies pretty much dominate the National Registered Agent business. Another reason to consider them is that all these companies offer useful tools for such things as filing your annual reports online, keeping track of important filing dates (aka "compliance calendar"), forms libraries with all of the state forms available in one place, and other tools for keeping track of and managing your entities. The most important feature I would suggest is the "Compliance Calendar" since missing a single compliance requirement could result in expensive penalties.
My personal recommendation if you are looking for a national registered agent is to use either CT or InCorp. They both have great service and great features.
In Conclusion...
I cannot stress enough what an incredibly bad idea it is to act as your own registered agent. There are worse ideas. For example, you could punch a cop in the face, however there aren't many worse ideas. It always confounds me how so many go through the trouble and expense of incorporating or forming an LLC to protect themselves and mitigate their tax liability, only to act as their own agent and negate some (if not most) of what they accomplished, just to save roughly $0.25 a day! This is one of the biggest (and dumbest) mistakes new business people make. I'm sure you are wonderful and capable, however don't use yourself! Use your attorney or a qualified service company!
References
- Nevada Secretary of State Press Release Regarding Implementation of the Model Registered Agent Act
http://www.sos.state.nv.us/information/n ews/press/2008/20080 701.asp
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