What is a registered agent — and do I really need one?

When forming your corporation, limited liability company (LLC), or partnership, you will come across the term “registered agent.” For these forms of business entities, a registered agent acts as a point of contact between the business and legal authorities, receiving important documents and ferrying them to the correct recipient within the business. Many business owners have only a vague sense of what a registered agent is, what they do, and what it will cost. Naturally, they wonder if hiring one is necessary and, if so, whether they can save capital by fulfilling the role themselves. 

In this article, we look at the responsibilities of these agents and whether hiring one is necessary for your corporation, LLC, or partnership. 

Registered agent definition

A registered agent — in some states, called an agent for service of process, resident agent, or statutory agent — is an individual or entity appointed by a company to receive service of process, such as legal notices and government documents. They exist because if a company gets sued, authorities want to make sure that someone has been appointed as the proper recipient so that there can be some assurance that all parties to the pending lawsuit have been appropriately notified. 

You need an agent at the time of forming your LLC or partnership or starting your corporation since they must be identified in the formation documents. You can change the selected person or business later, but you must choose one at the time of formation.

Main responsibilities

A registered agent’s primary responsibility is to be a point of contact between a business and authorities. The main duty is to relay the information from the correspondence — a subpoena, a warrant, or a summons, for example — to the proper party within the organization on time.

Typically, the documents an agent could expect to receive would include:

• Legal documents
• Government correspondence
• Compliance-related material
• Documents related to an ongoing lawsuit, like requests to produce documents or motions
• Notice of garnishment proceedings against an employee 

Beyond that, registered agents play a crucial role in the administration and operation of a business: 

• They are a consistent point of contact for individuals or organizations with formal — often legal — matters to conduct with the business.
• They receive critical legal documents and relay them to the proper party within a business. Without a registered agent, important official documents would not get where they needed to be on time.

Now that we have looked at what these agents are, let’s investigate whether hiring one for your business is necessary. 

Is a registered agent required?

Yes, all 50 states require a registered agent. This official point of contact must be named in the formation documents, like articles of organization or articles of incorporation. Without a designated agent, it is unlikely the formation documents will be approved. 

The person or business you choose at the outset does not have to stay the same for all of eternity, but if you are forming as a corporation or LLC, you do need one at the time of entity formation. If you need to see examples of how formation documents appoint an agent for service of process, it might be helpful to investigate legal software with templates of such documents for your review and consideration.

The risks of not having one

Not having a registered agent puts your business at risk of fines and legal complications.

Here are the risks that will happen if you do not have one:

• Administrative fines and penalties. Most small businesses do not have extra capital they can waste this way.
• Being considered as non-compliant with formation requirements. This would mean you would not be entitled to the limited liability protection that comes with proper formation.

Here are the risks that could happen if you do not have one:

• Miss important legal documents. This would put you at an immediate disadvantage in case of a lawsuit. Worst-case scenario: you could be subject to a default judgment because you did not receive notice and defend your interests. The risk of starting a lawsuit off on the wrong foot is not one anyone would recommend taking.
• Limit your ability to defend your interests. You’d have difficulty responding effectively to lawsuits or entertaining notions of settlement.
• Revoke your business’s good standing with the state. This could lead to an inability to continue operating, which is an extreme result, but it is possible.

What are the legal requirements for being a registered agent?

The legal requirements for who can serve as a registered agent are that the person or business entity has a physical address, can be reachable during working hours, and can be a resident of and legally able to conduct business in the state where the entity is registered — easy standards to meet, in most circumstances. 

There are no specific legal or minimum-education requirements for an agent beyond that the individual or entity must be legally authorized to conduct business.

Let’s take a closer look at these legal requirements:

• Have a physical address. This address must be in the state where the business is registered. P.O. box addresses do not suffice because they do not show physical presence in a state.
• Maintain regular business hours. Being consistently available during regular business hours is required: Monday through Friday, from 9 am to 5 pm local time. This is because a process server needs to be in the agent’s presence to provide notice.
• Be a resident of the state in which the business is registered. For example, a California business must have a California resident as its official point of contact.
• Be legally authorized to conduct business. The appointed person or entity must be legally able to conduct business in the state where the business is registered.

While the requirements for who can serve as an agent for service of process vary slightly from state to state, these can be considered a good general outline for who can serve. Just because someone can be a registered agent does not mean they would be an ideal candidate to serve as one. 

Can I be my own registered agent?

Yes, small business owners sometimes opt to appoint themselves as registered agents because this results in no added cost. But keep in mind that if you designate yourself, you have to be regularly available in the state where the business is incorporated. So, it’s not a good idea if you travel a lot. 

Also, the address of an agent becomes a matter of public record, so people who do business out of their homes may not like compromising their privacy this way. Finally, if you do not know how to fulfill the required duties, designating yourself is worse than having none at all.

Many small business owners find that they achieve better peace of mind when hiring a professional or service because doing so removes any question of suitability. Plus, it might be worth the cost.

How much does it cost to hire a registered agent?

The cost can be anywhere from nothing — for the first year — to several thousands of dollars. Most charge an annual fee between $100 to $500 a year.

Entrepreneurs who opt for professional help can choose between professional registered agents — most often individuals — and registered agent services, generally small businesses that offer more services than professional agents — like scanning documents or courier services — and cost accordingly more. 

Some businesses choose to have a lawyer or law firm as their official point of contact. This is typically the most expensive choice since the business owner is engaging the often-costly time and attention of a legal professional. Even though paying for an agent adds cost, many find it worth it for the peace of mind it brings, and the potential drawbacks can eclipse the cost savings.

How to change your agent

The process of changing your registered agent involves filing a certificate of change or change of amendment form with the proper authority, which is most often the secretary of state. For example, here is the Notice of Change of Registered Office/Registered Agent form from the Minnesota Secretary of State.

It is advisable to formally notify the earlier agent of the change, memorialize the current agent’s knowledge and consent, and preserve copies of both documents. You will need to amend any formation documents — like articles of organization or articles of incorporation — so they reflect the change.

Overall, changing an agent is not difficult, but it does entail several steps of filing forms and paying registration fees. You must follow these steps closely to avoid authorities having outdated contact information for your agent.

Final thoughts

A registered agent fulfills an essential duty by serving as the appointed point of contact between a corporation, LLC, or partnership and authorities. Serving in this role does not sound complicated but it is a crucial task that not every person or entity is cut out for.  Choosing an agent is a decision you must take seriously, as the ramifications of the choice go far beyond the legal requirement to appoint one.