Shortly after incorporating or forming an LLC, small businesses must designate a registered agent. Not familiar with the term? A registered agent, often abbreviated as an RA, is the point of communication between the state and your LLC or corporation. Designated registered agents accept official documents on behalf of the business. They must organize the paperwork, deliver it to the business owner in a confidential, timely manner and remain in compliance with the state law.
Who can be a registered agent? A registered agent may be a third party representative, or it may be the entrepreneur themselves. Other members of an LLC or corporation may also be registered agents. Entrepreneurs who decide to act as their own registered agents are able to save a bit of money in the process. However, there are certain requirements registered agents must be able to fulfill in this role. Let’s take a look at some of the key requirements necessary to be a registered agent.
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Registered agents must be residents of the state
One of the first requirements of acting as a registered agent is being a resident of the state in which you do business. You must have a physical street address in that state, and a P.O. Box is not considered to be an acceptable address. If you do not have a physical address in the state where business is conducted or if your LLC/corporation has been formed in another state, you’ll need to make both changes before designating yourself as a registered agent.
What does your availability look like?
Members of an LLC or corporation may jump at the chance to act as their own registered agents. However, he or she must be available to receive service of process. Typically, the rule of thumb is that the individual is available to accept documents between general business hours of 8 a.m. to 5 p.m., Monday through Friday.
This is often the make or break moment for entrepreneurs deciding whether or not to become RAs. Do you have plans to be on the road for the first few months that your business is up and running? What if you need to take a meeting in another city and will be out of the office during regular business hours?
Regardless of whether you work from home or in a brick-and-mortar storefront, not everyone has a schedule with this much on-site availability. You could be penalized and even fall into bad standing if there is a service of process and you are not physically present to accept it. Consider your schedule carefully before committing to act as a registered agent. If you know you cannot commit to it, you may need to appoint a third party to help. (We’ll talk more about this option momentarily).
Related: What Mom and Pop Shops Need to Do to Stay in Compliance
Discretion and privacy may be harder to come by
What does this mean? Let’s say, for example, that you run a clothing boutique. It has been incorporated as an LLC and has a storefront location. You spend a lot of time working at the store and see plenty of foot traffic come in and out throughout the day.
You have designated yourself as a registered agent. The storefront is used as the physical address, so you could receive any kind of service of process publicly at your store. If you were served with legal paperwork, employees and customers could see this happening. They may cringe on your behalf, or worse, view your business in a slightly less positive light.
Before becoming a registered agent, ask yourself how comfortable you are with receiving certain types of paperwork in public. There is not an added layer of discretion that comes with being your own RA. If you feel comfortable receiving all forms of process, including sensitive materials, in the open, then you’re set to act as a registered agent.
What happens if you’re not ready to become a registered agent?
You’ve reviewed our checklist, but still find yourself struggling to decide whether or not you have the bandwidth to be a registered agent. Maybe you haven’t found the proper physical location yet. Perhaps you’re experiencing scheduling conflicts. Or, you’ve given it some thought and decided you aren’t comfortable receiving confidential paperwork in public.
What should you do if any of the above applies to your situation?
The solution is simple. Rather than designating yourself as an RA, you may choose to work with a third party registered agent service.
Let’s take a look at the built-in benefits entrepreneurs receive in doing so:
- Third party registered agents are local: They have a physical location in the state you do business in, and are residents of the state. They’re also available during general business hours.
- They’re highly organized: A third party registered agent will collect documents, like franchise tax forms and renewal reminders, and organize them on behalf of your business. This is a huge benefit for entrepreneurs who struggle to keep up with deadlines or remain organized in general.
- They provide an added layer of discretion: A registered agent will deliver your paperwork privately. This ensures that you do not have to worry about visitors publicly arriving unannounced to your office or storefront.
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Should you designate yourself as a registered agent? The choice is up to you and any additional members of your LLC and corporation. Meet together to discuss it and call a vote to ensure everyone is on the same page, no matter which option you pick for your business.
