Deciding to take your small business to the next level by incorporating or forming an LLC is an important step in the lifecycle of any company. If you’ve recently incorporated or formed an LLC, you’ll realize that one of the prerequisites to becoming a corporation or LLC is designating a registered agent in the state of incorporation.
If you’re not familiar with the term, a registered agent receives important legal and tax documents on behalf of a business in a given state. This includes important mail sent by the state (annual reports or statements), state tax documents, as well as any Notices of Litigation.
Individuals can act as a registered agent for a business. If you have a physical address in the state where you incorporate or foreign qualify, you could name yourself as the agent. While it may be tempting to take on this role for yourself, here are five reasons why you should think twice:
1. The registered agent must have a physical address in the state of incorporation or qualification: A registered agent is required to have a physical address in the state; post office boxes and private rented mailboxes won’t suffice. If you incorporated or formed an LLC in Delaware, but you live in California and your company is physically located in California, this means you cannot serve as a registered agent in Delaware. In this case, you’ll need to use a professional third party as your registered agent in Delaware.
2. Your company does business in multiple states: When you register your company to conduct business in other states besides where you incorporated, you’ll need a registered agent in each of those states (unless you have physical offices in each state).
3. You don’t maintain normal business hours: The registered agent needs to be available during normal business hours to accept important documents from the state. If you set your own hours or aren’t tied to an office (i.e. you’re a real estate agent or landscaper), you should consider a third party service so you never miss an important communication from the state.
4. Your address is likely to change: A registered agent’s address must always stay current in the state records. Any changes to the address require a formal state filing, which is often accompanied by a fee. By using a professional third party service as your registered agent, you never have to worry about updating the state records – no matter how many times you move over the years.
5. The registered agent’s address is of public record: Since the registered agent’s address is publicly available, anyone has access to it… including marketers, mailing lists, and spammers. Registered agents often receive unsolicited junk mail for their business. If you wish to keep your company or personal address information confidential, opt for a third party registered agent. You’ll get an extra layer of privacy and won’t have to deal with as much unsolicited mail.
While a registered agent may seem like a trivial formality, it actually plays an important role in receiving communications and keeping your corporation or LLC in good standing. The last thing you want is to miss an important filing date or fail to respond to a litigation notice because you didn’t receive the notice on time.
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