LLCs and other companies need multiple things to get started, including Articles of Organization, business plans, and more. But one thing that some new businesses forget to consider is a registered agent: a professional who handles all official government and legal correspondent for your business.
Let's break down what a registered agent is and the value they can provide to your company.
What is a Registered Agent?
When an LLC or another business entity is established, they need a registered agent: a third-party agent who lives (or who at least has a physical address) in the same state in which the business entity is being created.
A registered agent is an official officer who is the designated point of contact for the company for any legal documents, official government correspondence, tax forms, and more.
What Does a Registered Agent Do?
As the above description suggests, registered agents handle all of the ongoing official and legal communications between a company, such as an LLC, and official government agencies, organizations, and legal groups.
To ensure that these duties are fulfilled, registered agents must be in the state in which the business is conducted so they can accept those documents and forward them or communicate to executives in a timely manner. In many cases, registered agents reside in the same city as a business’s headquarters.
A registered agent can accept any legal or tax documents on behalf of a business, as well.
Furthermore, registered agents may provide ancillary services, including:
- regular bookkeeping and accounting
- mail handling and organization
- document overview and editing
- and more
Why You Need a Registered Agent?
Every newly formed major company, such as LLCs or corporations, need registered agents to act as their points of contact for official government agencies and legal groups or offices. But beyond these official requirements, registered agents provide a number of benefits to companies that employ them:
- For one, registered agents can keep businesses from having to put their legal or executive addresses online. This can prevent spam or opportunistic mail from reaching executives and wasting their time
- Furthermore, registered agents save company executives or LLC members some embarrassment. Many companies will be sued over their lifespans for trivial concerns, but registered agents can receive such documentation and prevent LLC or other company members from being served in front of friends, family members, or clients
- Aside from their official services, registered agents also provide valuable accounting and bookkeeping services that can help a business to run more smoothly
More importantly, businesses that don't have registered agents may end up falling out of good standing with their state of operation. Some states require you to have a registered agent at all times – if you fail to maintain this requirement, you may lose your LLC status or be barred from continuing to operate until you correct the error. Additional fines may include fees or the inability to enter into legal contracts with other businesses.
How to Choose a Registered Agent
Of course, while hiring a registered agent is important, you need a good registered agent overall, not just anyone who can technically do the job. That's why it's important to choose your registered agent carefully.
Requirements of a Registered Agent
Fortunately, the requirements to be a legitimate registered agent are relatively simple:
- Be 18 years of age or older
- Have a physical address in the same state in which the business operates
- Be available during normal business hours
Thus, any qualified individual that lives in the same state as your business and who is an adult can technically be a registered agent.
Assigning Yourself as a Registered Agent
You can always assign yourself as your company’s registered agent. All you have to do is live in the same state as your business, which means your permanent physical address must be in that state as well.
However, as mentioned, this can be very stressful and add on to your existing duties such that it's easy to become overwhelmed. This path is only recommended for single-member LLCs or smaller companies that may not have the cash to hire a third-party registered agent.
Qualities to Look For
This being said, there are some key qualities you should look for in any worthwhile registered agent. A great registered agent should be:
- Compliant and in good standing with the law. A registered agent that is in trouble with the law will not be able to carry out their official duties as expected and may get your business in trouble by association
- Experienced in accounting and bookkeeping as disciplines. Lots of registered agent work involves looking over financial information or official business documents. Having a keen eye and excellent organizational skills are also important
- Dedicated. A good registered agent should be as dedicated a part of your business as any other official employee. After all, they may need to provide regular news to company executives and work during normal business hours for your company
Because of these qualities, many businesses use third-party registered agent services, which can provide registered agents for businesses in certain states. This is particularly useful for smaller companies that may otherwise have to assign a friend or company executive to the role, which adds to their existing duties and can make things stressful.
Third-party registered agent services can provide registered agents that are flexible enough to fit your company's schedule, are experienced enough to provide all major duties, and who are professionals through and through.
What Happens if You Don't Have a Registered Agent?
As discussed above, most states require you to have a registered agent to handle any legal or official government correspondence or transactions. If you fail to have a registered agent:
- You may face high fines
- Your company may be disallowed from doing business in your state of residence
- Your company could face additional penalties
All in all, registered agents provide valuable services in any growing organization. Be sure to appoint or hire a registered agent as soon as possible, especially if you're planning on forming an LLC or any other type of structured business.