In this article, I want to briefly review what a registered agent is, who you can hire as your registered agent, and help you determine whether you need to pay for a registered agent for your online business.
As an online business attorney who files many LLC’s on behalf of my clients, the issue of whether a client should hire a commercial registered agent for their LLC is one of the most common questions I get.
Today we are going to dive into some of the most common questions about registered agents.
And here is a short video that dig’s into these questions in bit more detail:
What is a Registered Agent?
Every state has its own statute that spells out exactly what is required to form and maintain an LLC, or Limited Liability Company.
And in every state, if you form an LLC you must provide the name and physical street address of a Registered Agent. This can also be called a statutory agent, resident agent or agent for service of process.
This is a location (note it cannot be a P.O. Box) that is open during regular business hours in your state. Additionally, there must be someone available to sign for and receive legal documents such as lawsuits, tax notices, subpoenas and other official documents.
The address you provide MUST BE a physical address, meaning that it CANNOT BE a P.O. Box or Virtual Address. This street address must be located in the state of formation where you file your LLC.
If you live in North Carolina and form an LLC in Wyoming, you can’t use your address in North Carolina as the registered agent address. You would need to hire a corporate registered agent in Wyoming. Note that I do NOT recommend this strategy. Click here to learn more about why you should register your LLC in your home state.)
The Registered Agent that you name must be available at this address during normal business hours. This means Monday through Friday they must be available to accept and sign for important legal documents.
Your Registered Agent address, or Registered Office, can be:
- An office address where your business is located;
- Your home address; or,
- The address of a friend, family member or relative.
Can I serve as my own Registered Agent?
When choosing a registered agent for your LLC in your formation documents, you have three primary options.
First, you can name yourself as the registered agent for your LLC.
Second, you can hire a commercial agent for a low annual fee to accept documents on behalf of your LLC.
Your third and final option is to name a friend or family member as your LLC’s registered agent.
So yes, while you can name yourself as the registered agent for your LLC, the story doesn’t end there.
The real question is whether or not you SHOULD name yourself as the registered agent for your LLC.
Should I use a Commercial Agent?
As with anything when it comes to the legal aspects of running your online business, you have to weigh the costs and benefits when deciding whether to hire a commercial registered agent to accept service on behalf of your business.
Most commercial registered agents will charge between $100 and $200 per year for the service. Some, such as Incfile, will offer the first year free if you use them to set up your LLC.
Many online entrepreneurs determine that this is an unnecessary expense. Instead of paying this fee, they will list themselves and their home address as the registered agent.
The problem with this strategy is that, as an online entrepreneur, you may decide to take a vacation for several weeks, or work strange hours so that you can attend activities with your kids during normal business hours, or do any number of things that don’t involve being home to accept the mail during normal business hours.
If you are like me, you may decide that lunchtime is a great time to take the dogs for a walk for an hour and totally miss the mail.
If you do any of these things, and you don’t receive an important piece of official correspondence, there can be a number of problems:
- You could default on a lawsuit
- You could fail to respond to a subpoena
- You could miss a tax or annual reporting notice, causing expensive late fees and penalties
- Your LLC could be suspended or even dissolved without your notice
The cost in both time and money to any of these things happening is much greater than the cost of hiring a commercial registered agent for your LLC.
For that reason, I typically recommend that my clients use a commercial registered agent. The fee for their services can be written off as a business expense, and you will have piece of mind knowing that your LLC will not miss any important legal deadlines.
What is Service of Process?
One of the bedrock principles of our legal system in the United States is something called “due process”. This means that whenever a case, whether criminal or civil, makes its way through the court system or some type of administrative legal proceeding, the court must follow the rules of civil procedure.
One of those rules says that anyone who is named as a defendant or a respondent in a lawsuit must have appropriate notice of the proceeding against them.
In order to provide that notice, a plaintiff or petitioner must properly serve the defendant with notice of the lawsuit. This is called “service of process”.
Because an LLC is an entity created by state law, and is not an actual person, every state has a set of rules to follow for how to provide the owners of the LLC with notice of a lawsuit against the LLC.
And the way to do this is to serve the registered agent (named by the owners of the LLC) with the lawsuit. The registered agent is then charged with notifying the owners that the LLC has been sued.
So if you are wondering why a registered agent is necessary – you can blame the due process clause that is contained in 5th and 14th Amendments to the United States Constitution.
How to Decide on Which Registered Agent to Use?
As mentioned above, you have three options as to who you can use as your registered agent.
My opinion, as a lawyer, is that it is always best to use a Commercial Registered Agent. The only exception to this rule is if you have a dedicated office that is open to the public throughout the year and you have a staff person that is ALWAYS available to accept your mail and other legal documents.
In this case, you may be able to get away with using yourself as the registered agent and providing your business or office address on your LLC paperwork.
But for any other online business, especially those where all workers are remote and you only have virtual office space or are working remotely from your home office, then using a commercial registered office is the best option.
As for using a friend or family member as your agent, this is just playing with fire and I don’t recommend it. Can you imagine how awkward it would be for them to sign for a lawsuit on your behalf? Or worse, what if they take a vacation and miss an important legal document that then gets you into trouble?
The only way to be absolutely certain that you are receiving all important legal documents in a timely manner is to use a reputable corporate agent.
I own two businesses – a law firm and a digital marketing company. For both of them I use the same agent that I use for all of my law firm clients. To learn more, click here.
Can you Change Your Registered Agent?
Yes. You can change your registered agent at any time.
If you filed your initial Articles of Organization and named yourself as the registered agent but have now decided that this was unwise, then all you need to do is hire a new registered agent.
When you find a new registered agent, they will likely ask you some questions about your LLC, when and where it was formed, and then ask you to pay for the first year of service.
Once you have paid, they will typically file the paperwork necessary to update your Secretary of State with their information as your new registered agent.
On the other hand, if you are just starting your LLC and would like to use a corporate registered agent but file your Articles of Organization on your own, then you will follow the same procedure and after you have paid for the first year, the commercial registered agent will provide you with instructions, including what address to insert into the Articles of Organization for your new business filing.
What if I Name Myself as my LLC’s Registered Agent and am NOT Available to Receive Legal Correspondence?
The biggest mistake many online entrepreneurs and business owners make when filing their Articles of Organization is to name themselves as the registered agent for their LLC. Not only are you making your home address and personal information part of the public record and associated with your LLC, but you are also subjecting yourself to unnecessary liability in the event that you are unavailable to accept a lawsuit or otherwise miss an important legal notice.
A plaintiff’s lawyer that decides to sue an LLC will look up the name of the registered agent on your secretary of state’s website. With that information, they will go through the appropriate legal channels to attempt to have your registered agent served.
If they attempt to serve you and are unable to do so because you are not home, then the court can order “substituted service” by serving the Secretary of State’s office, or by posting or publishing the documents in a newspaper.
For obvious reasons, this is not as reliable as providing actual notice via direct service through a commercial registered agent and can result in your failure to respond in time and a resulting default judgment.
Alternatively, it is also possible that someone else in your residence could sign for important documents and not understand or comprehend the significance of the lawsuit. In this case, you may not receive notice of the lawsuit in time to respond, also leading to a default judgment.
Will your Registered Agent receive the Mail for Your LLC?
Many people make the mistake of thinking that when they hire a corporate agent, they can also use that company, and the address they provide for registered agent services, as their virtual business address.
This is a huge mistake for several reasons.
First, you are likely not contracting with a corporate registered agent to receive your business mail. As such, if you use their address improperly, then you are likely violating the terms of their contract with you.
As mentioned above, the purpose of a corporate registered agent is to appoint an entity or professional that will receive important legal documents, annual reports, legal notices, subpoenas, tax notices and other important mailings on behalf of your LLC or other business entities. While some commercial registered agents will double as a virtual business address, most do not.
This is because the commercial registered agent you hire is, in all likelihood, not prepared or equipped to handle and process your normal business mail. Not only will you not have provided them with the authority to open, scan and/or forward your mail by completing this form with the USPS, by naming their address as your normal business address will violate USPS regulations.
As a result, when you file your Articles of Organization (or Articles of Incorporation in the event you decide to file a Corporation instead of an LLC) and name your commercial registered office’s address as the same address as your business address, you are making a fraudulent filing. This could be legal grounds to “pierce your corporate veil” if your LLC is ever involved in a lawsuit.
In order to keep your LLC in good standing as a business entity, the best practice is to use a commercial registered agent.
What is the Best Registered Agent Service?
There are any number of commercial registered agent services available for you to hire. When you are looking to hire a commercial registered agent, you should look for the following characteristics:
- Affordable price point – A Registered Agent will typically charge between $100 and $300 per year. Some will offer a discounted fee for the first year if you use their service to set up your LLC.
- Online Portal – You should have access to all your documents online in a secure portal.
- Scanning your documents for you
- Email and Mail delivery. Any service that will not scan and email your documents to you is not worth the money. Since many online entrepreneurs work from overseas as digital nomads, it is vitally important that your documents be emailed to you and available in electronic format.
There are two companies that I recommend for registered agent services.
- IncFile offers the first year of service for free if you set up your LLC through this link. (affiliate link)
- The second company is the same company that I use for my own businesses as well as for my clients. Click here to learn more and sign up.
Not Legal Advice
If you require additional legal expertise or legal resources, please contact us for help negotiating your contracts or for assistance with any of your business related legal needs. Stop worrying about the legal stuff and hire a business lawyer instead.