One of the most basic requirements of setting up a business or nonprofit is appointing a registered agent for service of process. When you register a legal entity in any U.S. state, you are required to list a physical address where courts, government agencies, and process servers can get in touch with you, the business owner. The registered agent’s job is simple: be available to receive legal and government notices during regular business hours, then forward them to you so that you have enough time to respond.
If you’re a first-time founder or business owner, you’ll quickly discover that there are a ton of options for selecting a registered agent for your business. On paper, the role of the registered agent is straightforward. However, you’ll find that not every registered agent or registered agent company is the same. To help you navigate that decision process, we’ll share what we call the “5 Ps” of choosing a reliable registered agent for your business.
The registered agent for your LLC, corporation, or nonprofit can be an individual or a company (such as a registered agent service provider). The registered agent must reside at a physical address and be available during all regular business hours, typically 9 AM to 5 PM, Monday through Friday. You’ll also need a registered agent with an address in each state where you plan to register your legal entity.
When deciding on a registered agent, remember that individuals may not truly be available at all times. And, if you are looking to scale quickly, you’ll need a solution to meet the requirements of each state.
Most major registered agent service companies provide offices in multiple states, which gives your business the option to rely on one vendor as you grow. If you choose a registered agent company that operates only in one state or a few states, remember that you may need to seek another vendor if your business expands outside those jurisdictions.
The registered agent’s job is to maintain a physical office in a state, greet process servers, and maintain the infrastructure to forward any service of process or notices to you in a timely fashion. As a result, every registered agent service company will charge your business an annual fee to provide this service.
As you research registered agent companies, you’ll find annual rates and offers that range from “free” to over $ 300 per year! You might be asking, what’s the big idea with that? Isn’t it all the same service?
Effectively, the answer is yes. On one hand, remember that the registered agent company you choose has to cover the costs of providing the service to you. Be aware that the free or deeply discounted service you sign up for may be increased – by a lot – in subsequent years. On the other hand, a rate of several hundred dollars per year may be necessary for a company that receives many legal documents over its lifetime, but it may not be the right fit for a small business or nonprofit.
The registered agent industry is also fraught with hidden fees and other pricing gimmicks. As you do your homework, it’s best to read the company’s website and online reviews. You’ll quickly learn how they treat their customers and what you can expect from their service.
One of the critical functions of a registered agent is to receive time-sensitive legal documents and to forward them to the appropriate parties. When your business is served, you have a limited time to respond, sometimes 21 days or less.
Consider the following scenario. Your Chicago-based company has been doing business in Missouri, and unfortunately, one of your former Missouri-based clients decides to initiate a lawsuit against you. Generally, those papers will be served upon the registered agent you’ve appointed in Missouri. Logistically, there are a few ways you can receive those documents. By far, the fastest way is electronically.
Keep in mind, many registered agent companies still mail original documents to the company, or worse, first move them through a central processing facility. Each extra step or day in the mail means one less day that you or your legal counsel can respond.
While no one relishes the thought of receiving service of process for their new business, it can happen. For that reason, it’s important to select a registered agent that can reliably forward those documents to you.
The world of compliance is complex. Every business and nonprofit faces unique regulatory challenges depending on its location, activities, and industry. Appointing and maintaining a registered agent is, as they say, just the tip of the iceberg.
More experienced business owners, or those with dedicated in-house resources, may be able to take on these additional compliance responsibilities on their own. For others, your registered agent may be able to help. Many registered agent companies provide additional filing services to assist with registering your business with secretaries of state, departments of revenue, and licensing authorities. Some registered agent companies even provide software that facilitates the tracking and reporting for your business.
If you need comprehensive compliance support for your business from the get-go, be sure to factor that into your registered agent vendor selection process.
Of course, there’s a human element to all of this as well. Naturally, you gravitate towards people, companies, and messages that best fit your culture, your style, and your way of doing business. While the services, pricing, and technology of your registered agent are important, don’t overlook things like customer service and “ease of use” of their offerings. If online research isn’t giving you all the information you need, give that company a call. Do you speak with a live human being? Are they knowledgeable and friendly? Could you see yourself working with them on an ongoing basis? If the answer to all of these questions is “Yes,” then perhaps you’ve found a match.