If you operate any formal business entity in the United States ― like a limited liability company (LLC) or a corporation ― you need to designate a registered agent for your business.
In fact, you will not be allowed to complete your company’s formation process without a registered agent. But what is a registered agent, and how does it apply to your business?
This is a very common question among business owners, so to try to clear up any confusion, the Model Registered Agents Act was introduced in 2006. The Model Registered Agents Act (MoRAA) is now in effect in ten states and the District of Columbia, so it’s important to understand exactly what the act says and why it was implemented.
Do you have questions about the Model Registered Agents Act and how it affects your company? Read on to discover the answers.
What Is a Registered Agent?
First, let’s quickly run down what the registered agent’s role is in the American business landscape. A registered agent is an individual or a business entity that has a physical address in the state you’re doing business in. This person or company is responsible for receiving important government document deliveries, then alerting you of the delivery and forwarding the documents to you.
A crucial part of this role is to be present at this location (commonly referred to as the registered office) during all standard business hours, because the government needs to be able to contact an official representative of your business at any time.
For example, if someone files a lawsuit against your business, the service of process documents would be dropped with your registered agent, who would quickly notify you of this legal action.
What Is the Model Registered Agents Act?
The Model Registered Agents Act was an effort led by the American Bar Association and the International Association of Commercial Administrators to standardize the rules and regulations surrounding the role of the registered agent for American businesses.
Because each state is allowed to set its own laws regarding registered agents, there is a considerable amount of variance from state to state in the way this role is defined.
The main aspect of the Model Registered Agents Act is the way it creates two different types of registered agents, which it refers to as commercial and noncommercial. A commercial registered agent is an entity that has filed an official registered agent listing statement with the jurisdiction it operates in ― there is usually a fee associated with this filing, and a commercial registered agent typically serves multiple businesses within the same jurisdiction.
There is no functional difference for the business between a commercial and noncommercial registered agent, as they both serve the exact same purpose. The only difference is that a noncommercial agent has not registered with the state, and is typically not listed in the Secretary of State’s list of registered agents.
Noncommercial registered agents are still allowed to handle multiple clients within the jurisdiction if they so choose.
Which States Use the Model Registered Agents Act?
Currently, the Model Registered Agents Act is in effect in ten states, as well as the District of Columbia. Here are the states where MoRAA rules and regulations are actively in place:
What Are the Benefits of the Model Registered Agents Act?
The biggest benefit of MoRAA is the way this act streamlines rules and regulations for registered agents.
Especially for companies operating in multiple states, having consistent legalities regarding the role of the registered agent can be a tremendous help. Before the Model Registered Agents Act, businesses operating in multiple states needed to be fully aware of the differences in registered agent laws between jurisdictions, which can lead to considerable confusion.
An even bigger issue is how these different laws affect registered agent services themselves. Many registered agent services operate in all 50 states, which can generate a laundry list of hassles for a company trying to provide service in each American jurisdiction. The Model Registered Agents Act helps clear up some of those hassles, because it standardizes the regulations that these entities need to follow in 20% of states.
What Are the Drawbacks of the Model Registered Agents Act?
The most significant negative of MoRAA in our opinion is the way it unnecessarily created new distinctions in the terminology used by registered agents. Specifically, the terms “commercial” and “noncommercial” for registered agents can be a source of confusion for business owners who don’t know which type of agent to designate for their companies.
Especially considering the fact that there is no difference in the way commercial and noncommercial registered agents provide their services to their clients, separating agents into these two distinctions feels unnecessary at best.
The only other drawback that we’ve experienced with the Model Registered Agents Act is the fact that it only applies to ten states. If MoRAA was in effect in the majority of states, it would do a far better job of simplifying the role of the registered agent and our understanding of it. As it stands, ten states isn’t a very long list, especially considering that most of the states that follow the Act are small states without much business activity.
All of the ten states that follow the Model Registered Agents Act are among the 20 least-populated states, so it stands to reason that standardizing the role of the registered agent in states like Wyoming, North and South Dakota, etc., doesn’t help too much because those states don’t have many businesses operating in their jurisdiction to begin with.
Should You Use a Registered Agent Service?
A registered agent service is a company that specializes in being a registered agent for a wide variety of businesses across the country, bringing tons of expertise and a healthy dose of reliability to the role. In the context of the Model Registered Agents Act, one significant benefit of registered agent services is that if you use one, you won’t have to care about MoRAA, or even ever think about it.
Most professional registered agent services operate on a national basis, meaning there’s no restrictions on which states you can operate your business in. Furthermore, you won’t need to concern yourself with details like states that use MoRAA vs. states that don’t, or commercial vs noncommercial registered agent designations.
There are quite a few of these companies out there, and most of them make it quite easy to enlist their services. On the other hand, it can be a bit tricky to figure out what exactly sets these companies apart from each other, because they provide very similar services. If you want some help narrowing down your options in this regard, we suggest that you read through our complete guide to the top registered agent services.
Overall, ZenBusiness, LegalZoom, Northwest, and Incfile are services that come to mind for many entrepreneurs looking for a good registered agent service.
Plus, all of these services (and others) can form an LLC for you and act as the registered agent if you choose.
While the Model Registered Agents Act (MoRAA) was enacted to standardize the role of the registered agent for American businesses, the reality is that by introducing a new distinction between commercial and noncommercial registered agents ― combined with the fact that the only states using it have small populations ― it’s quite possible that MoRAA is overly complex in ways that only make the situation more confusing.
With this in mind, we will reiterate that we already recommend using a registered agent service to the vast majority of our readers. These services don’t cost a tremendous amount of money (usually around $10/month or less), and they remove the hassles of MoRAA from your business.
We hope this article helped you expand your understanding of the Model Registered Agents Act, and we wish you luck in all your business ventures.