When building a business, several factors must be kept in mind. Countless details, from developing a solid business plan to choosing the right location to set up shop, will come into play. Though some elements may seem like secondary concerns, they’re actually just as important as the more prominent points.
That’s certainly the case when it comes to appointing a registered agent. All businesses, no matter their size or industry, are legally required to have a registered agent on file. That includes LLCs, LLPs, non-profits, and corporations. Furthermore, companies must appoint registered agents in each state in which they operate.
Understanding the role of a registered agent is essential. Knowing how to choose the right one for your business is equally crucial. Consider the following information to ensure you cover all the bases when appointing a registered agent.
What Is a Registered Agent and His or Her Role in a Business?
Registered agents are appointed by businesses to receive certain types of documents on their behalf. This is known as service of process with process being the paperwork itself. From there, they pass along that paperwork to the appropriate person at the business.
Registered agents can be individuals or companies that provide such services. Businesses must list their appointed registered agents on their formation documents before filing those papers with the secretary of state.
Some of the items registered agents handle are formation documents, such as certificates of registration and incorporation, articles of incorporation, partnership agreements, and certificates of partnership. They’re also responsible for tax documents and annual reports. Registered agents likewise handle legal documents, like subpoenas and lawsuits.
Why Do Businesses Need Registered Agents?
Businesses need registered agents for many reasons, not the least of which is remaining in compliance with the law. Serious consequences can ensue for failing to designate a registered agent. Since this person or business must be listed on the company’s formation documents, not having an agent could prevent the company from being able to open its doors.
Not having a valid registered agent on file after the formation of a business can lead to significant fines. Failure to comply with this requirement can also cause a business to be shut down. In addition to those repercussions, the business may not receive important paperwork, such as documents from the IRS or state department of revenue and court papers. As far as those institutions are concerned, not receiving paperwork is no excuse for missing deadlines or court dates.
Who Can Be Appointed As a Registered Agent?
Overall, there are few restrictions on who companies can appoint as their registered agents. They can be trusted friends, employees, or even business owners or partners. Individuals must be over 18 years old and have a valid street address within the state the company will be operating. Post office boxes aren’t acceptable. Agents must be served documents in person at the physical address on file. These are general requirements; certain states may have other prerequisites.
As mentioned, businesses can also serve as registered agents. In fact, registered agent services are common alternatives to individuals. These services offer a range of benefits over individual agents, including more experience, state-to-state coverage, and reliability to name a few of the most significant.
Regardless of who you choose as your registered agent, that representative must be listed on your formation documents. If your agent changes, that should be noted immediately, so the new registered agent’s name and address will be on file for future correspondence.
How to Choose a Registered Agent
That brings us to choosing the right registered agent to meet your needs and expectations. As noted above, almost any adult who lives in your state and has a street address can be designated as your registered agent. That doesn’t necessarily mean you should appoint a friend or relative to this position. Keep the following guidelines in mind to help you make a favorable choice.
Cover the Basics
As a bare minimum, at least be sure the person you appoint meets the requirements for your state. If you choose someone who doesn’t measure up, serious problems could arise. This must be an adult with a street address in your state or a company licensed to provide registered agent services in your state. Do a background check if necessary.
Trustworthiness is key when choosing a registered agent. In many ways, the fate of your business rests in this person’s hands. He or she must be responsible enough to make sure documents reach your hands in a timely manner. Nothing can be left out of the mix. One oversight could be all it takes to bankrupt or shut down your company.
With that in mind, be sure you choose someone who has proven his or her dependability. It’s best not to appoint someone as a registered agent if he or she has never filled such a position before or is known for dropping the ball. Consider appointing a business that has a track record of living up to clients’ needs.
Experience is also essential when selecting a registered agent for your business. Numerous responsibilities come along with this title. Registered agents don’t just receive paperwork and deliver it to you.
They should be able to keep up with pending deadlines for annual reports and IRS matters along with many other situations. They should also be well-equipped to keep you updated on those details, too. Though you’re ultimately responsible for meeting those deadlines, your registered agent is an important link in the chain.
On top of those aspects, security should be at the forefront of your mind. Businesses are frequently the targets of fraud, cybercrimes, and other security breaches. Many become victims because members of their supply chains don’t have effective security measures in place.
Your registered agent should have numerous security measures in effect and take all the necessary steps to cover new threats as they arise. That could mean using antivirus software, antispyware and malware solutions, password protection, encryption, and data access control measures to name a few.
Anyone who might have access to your incoming documents or the devices that receive them should also be trained in computer safety protocol. Those people should understand the potential dangers of opening suspicious emails or sharing their passwords with others. Numerous other security solutions could be required as well.
Threats are running rampant these days. If you appoint an individual as your registered agent, chances are that person won’t have all the essential security measures in place. He or she may not even be cautious enough to heed the possible dangers. Registered agent services, on the other hand, are likely to place a high priority on security.
Many security measures are fostered by technology, but that’s not the only field in which technological advancements are vital. These days, documents are often uploaded, downloaded, and forwarded electronically. Your registered agent should have reliable tools and equipment to make all that possible.
Making sure your registered agent can monitor your company’s status, upcoming deadlines, and other important matters is also essential. That means being able to access state databases and other necessary information. Otherwise, vital details are bound to be overlooked.
Even keeping track of filing deadlines and paperwork that needs to be forwarded to you can be difficult without the right tools. Most individuals don’t have all that technology at their disposal. They may not understand how to use it if they do. That’s not the case with registered agent services. They often have ample tools to work with and the training it takes to make the most of them.
Can I Be My Own Registered Agent?
The short answer here is yes. Many states allow entrepreneurs to act as their own registered agents. Considering all the other responsibilities weighing on your shoulders, though, doing so may be more of a liability than a sound business decision. You could forget upcoming deadlines, be served with a lawsuit in front of employees or potential investors, or lose critical paperwork among other problems.
Though you can, technically, be your own registered agent, experts advise against it. Doing so won’t necessarily save you any money in the long run and may ultimately cause more problems than you can handle. It’s typically best to choose a trustworthy individual or a registered agent service instead.
Protecting Your Best Interests with a Registered Agent
Registered agents provide valuable services to businesses. They receive vital paperwork on behalf of their clients and ensure those documents are promptly delivered into the proper hands. They also help businesses keep track of paperwork they need to file to remain in compliance with various state and federal regulations. Keep in mind, they’re also required by law.
Though almost any adult can serve as a registered agent, it’s best to think about this role carefully before appointing someone to fill it. While a relative or employee may be trustworthy enough to handle sensitive matters regarding your business, he or she probably doesn’t have all the additional attributes that make for an effective and reliable registered agent.
Contact us today to learn more about how we can help your business management operations.