5 Registered Agent Myths: Read ASAP!
One of the most important steps in any American business formation is the designation of a registered agent for your company. Every business entity is required to get a registered agent, yet we’ve found that there’s some confusion regarding what the registered agent’s role is, why it’s necessary, and who should serve as your registered agent.
To clear up the misconceptions regarding registered agents, we identified the top five myths about them. If you have any questions about registered agents, read on as we tackle them one by one.
What Is a Registered Agent?
To operate an American business in compliant fashion, you’ll need to designate a registered agent when you form your company. This person or business entity is a sort of middleman who receives your legal documents (like court summons, annual report reminders, etc.) from the state, then forwards them to you in a timely fashion.
The role of a registered agent is so important because your state government needs to be able to contact an official representative of your business at any given time. For example, if your business is sued, the state needs to be able to get in touch with you in order to deliver the service of process. However, without a registered agent, there’s a possibility that they will be unable to reliably contact you before it’s too late.
Who Can Serve as a Registered Agent?
Depending on which state you form your business in, the guidelines for registered agent eligibility may fluctuate a bit. In general though, your registered agent will need to fit the following guidelines:
- Must have a physical street address in the same state the business operates in
- Must be available during all standard business hours, every weekday
- If your registered agent is an individual rather than a business, they must be at least 18 years of age
Some entrepreneurs choose to serve as their company’s own registered agent, to designate their lawyer or accountant as their agent, or to name their spouse or a trusted friend or family member as their registered agent.
5 Registered Agent Myths
Now that we’ve laid down the basic elements of registered agents, let’s dive right into the misconceptions, of which there are quite a few! Make sure that your business doesn’t fall victim to any of the following common myths about registered agents:
1- Each business only needs one registered agent: If your business only operates in one state, this is likely true in your situation. However, if you execute business transactions in multiple states, or if you want to expand your operations into a new state, your company needs to have a registered agent in each of those states. Most major registered agent services provide service in all 50 states, but if you serve as your own agent, designate an attorney or accountant, or have a friend or family member serve as your registered agent, this could become a serious issue.
2- It’s easy and practical to serve as your own registered agent: While some business owners do serve as their own agent, we don’t think it’s usually a smart idea. On the plus side, you can save some money by avoiding paying someone to be your registered agent. On the other hand, if you serve as your own agent, you’ll need to be available at your place of business during all standard business hours, every Monday through Friday.
Obviously, your business in this situation can only operate in the state where you are located, and your address may become public record, which is a privacy concern for home-based businesses. You could also find yourself in a situation where you’re served a court summons in front of your employees or customers, which is awkward to say the least. Due to a combination of the factors we’ve already discussed, there’s a risk of missing a delivery, in which case a lawsuit could progress against your company without your knowledge.
3- Professional registered agent service is costly to acquire and maintain: In reality, hiring a professional registered agent is quite affordable, especially compared to the expense of some other business services. While prices fluctuate depending on which company you use for registered agent service, in general you can find options for around $10/month or less.
4- It’s not necessary to keep official notices from your state government: This isn’t necessarily a legal requirement, but it’s strongly advised. Any reputable registered agent will hold onto official government notices ― whether they’re for annual reports, tax forms, etc. ― or at least keep a digital record of the delivery. It’s important to be vigilant about keeping records regarding deadlines with your state to make it easier to maintain your good standing.
5- Registered agent service is basically just mail sorting: It’s true that part of every registered agent’s job is to sort through a bunch of junk mail, but this is just one small aspect of registered agent service. The key aspect of this role is to contact you as quickly as possible if the state sends you service of process, and also to help your business remain compliant and in good standing.
Should I Hire a Registered Agent Service for My Business?
We usually recommend hiring a professional registered agent service for just about any business entity. They can save you a tremendous amount of hassle compared to serving as your own agent, and they’re far more affordable than having an attorney or accountant handle this responsibility.
There are many companies offering registered agent service these days, and not all of them are created equal. With this in mind, we recommend checking out our guide to the best registered agent services available online.
In general though, our favorite registered agent service is Northwest Registered Agent. They charge a rate of $125 per year, and they include top-notch personalized customer support, as well as local scanning of every document they receive as your agent, instead of just scanning government docs like most competitors do. Northwest also provides a free year of registered agent if you have them form your business for the low rate of $79.
Another strong contender is IncFile, at a slightly lower annual price point of $119. Much like Northwest, Incfile offers a full year of registered agent service for free if you hire them to form your business entity, and they have the same $49 price tag for this combination as well. Incfile’s excellent customer reviews are a major selling point for them, so if that’s a priority for you, give them a long look.
There are quite a few common myths about registered agent service, but we think the concept is easy to understand with the correct information at your fingertips. In general, we think your best bet is to hire a professional registered agent service.
This option saves you time and hassle, and the reliability of this service provides some invaluable peace of mind. While a professional registered agent does cost some money, we think it’s worth it in nearly all cases. We hope we were able to clear up any misconceptions you had about registered agent service, and we wish you and your business the very best!