Are you forming a new business (yourself or via an online service) in the United States? If so, you may already know that you’ll need to designate a registered agent for your company in order to complete the formation process in a compliant manner.
Even though every business operating in America is required to have a registered agent, we find that there’s still quite a few misconceptions regarding what a registered agent actually does, and how this role affects your company.
With this in mind, we created this article to help you understand the most common registered agent myths that persist in our modern business landscape. We hope this guide helps you to improve your understanding of this important aspect of the American business, and answers your tough questions along the way.
What Is a Registered Agent?
Let’s start by clarifying exactly what the registered agent is. This person or business entity is tasked with receiving your company’s legal document deliveries from your state of formation. As soon as they receive one of these deliveries, they are to notify you as soon as possible, scan the document to create a digital backup, and forward the original to you.
Which types of documents does the registered agent handle? Most importantly, they take care of service of process deliveries for lawsuits, but they also receive tax documents, compliance filing deadline reminders, and other official government forms. Without a registered agent, you would run the risk of missing one of these important deliveries, which could have a variety of negative results for your company.
Top Registered Agent Myths
1) My business is small enough that I don’t need to bother with a registered agent.
We often find that people who operate businesses by themselves (for example, a single-member limited liability company) or run home-based businesses think that the need for a registered agent does not apply to them.
On the contrary, it is every bit as vital for a small company to have a registered agent as it is for a major corporation. It really doesn’t matter how big or small your business is, or what type of industry you operate in. If you operate a business in the United States, you need a registered agent.
2) It’s both simple and convenient to serve as your own registered agent.
We know plenty of entrepreneurs who designate themselves as their company’s registered agent. While this is legally allowed in every state, we rarely find that it’s a particularly good idea. The only positive aspect of being your own registered agent is that you can save a small amount of money that you would otherwise spend on registered agent service.
As for the negatives, they start with the requirement that you are present and available for deliveries every weekday between the hours of 9am and 5pm. If you are served for a lawsuit at your place of business, you risk having customers, neighbors, or employees witness the service of process delivery, which never looks good.
Additionally, if your business is based out of your home, you’ll need to make your home address a matter of public record, which is an element that has some rather obvious privacy concerns.
3) I will only ever need one registered agent for my business.
To make this myth into a true statement, you would need to add the words “per state.” If your business only operates in one state, you will only need one registered agent, but if you want to expand to do business in an additional state, you are required to get a registered agent for that state as well.
This is due to the fact that the registered agent needs to be physically located in the same state that your business operates in. Therefore, if you operate in two states, you’ll need two registered agents ― if you operate in three states, you’ll need three registered agents, etc.
4) It’s expensive to hire a professional registered agent service.
Registered agent service can be quite expensive if you hire an attorney or accountant to be your registered agent, as these professionals tend to charge high rates for this service.
However, if you hire a professional registered agent service like Northwest Registered Agent or Zen Business, you can get service for around $10/month or less. In addition, if you still need to form your business as well, service providers like Incfile will handle your formation for just $0 + state fee, while also including a full year of registered agent service at no extra charge.
5) It isn’t important to hold onto official government notices sent to my registered agent.
You’re not legally required to keep records of each notice the state sends to your registered agent, but you definitely should. Whenever your state sends you a notice, you should enter the date and information into your compliance calendar to help ensure that you never miss a deadline.
Especially for important periodical filings like annual reports that are vital to maintaining your company’s good standing with your formation state, keeping your notices can help you avoid fines and other penalties. Furthermore, in some states, these notices include important info like PIN numbers or passwords.
6) The role of a registered agent is essentially a glorified mail sorting service.
We hear this one quite often, although we suspect no one who says it has ever actually tried serving as a registered agent.
While any registered agent does spend plenty of time sifting through a pile of junk mail, they have a number of other responsibilities, like helping maintain a compliance calendar, providing client support, assisting with annual report filings, alerting business owners to pending lawsuits, and more.
Hiring a Registered Agent Service
If you want to receive peace of mind without breaking the bank, hiring a registered agent service can be a great option for your business. Because these companies are focused entirely on providing the best possible registered agent service (unlike an attorney or accountant who only offers registered agent as a side business), they know every detail of the rules and regulations provided by your state.
Furthermore, a professional registered agent service makes it easy to expand your business into an additional state, because most of them have offices in all 50 states. Unlike serving as your own agent, or hiring an attorney or accountant that only has one office, expansion with a professional registered agent service is quite simple.
If you’re interested in this option, take a look at some of our favorite companies that offer registered agent service:
- Northwest Registered Agent: Northwest charges $125 per year, and they’re the only major national registered agent service that locally scans every document they receive as your agent. They also have personalized customer support that assigns a dedicated account representative to each client. If you also need to form your business, Northwest offers a $79 formation package that includes a year of registered agent at no extra charge.
- Incfile: They are one of the most well known LLC and registered agent services available, with rates that start at just $119 per year. Plus they offer an awesome free LLC formation service if you haven’t created a business yet and would like a free registered agent service in the process.
- Zen Business: Zen Business has the same $119 base rate that Incfile offers, with an extra focus on making the process less stressful and an easier to use website. You’ll receive their outstanding customer support, as well as access to helpful software that allows you to track and file your company’s annual reports.
Compared to LegalZoom, which charges $299 per year, these three affordable registered agent services are far better deals and more than half the cost.
As you can see, there are plenty of common misconceptions about the role of the registered agent for American businesses. By properly understanding the myths surrounding this important role, you can prevent some of the most common mistakes made by entrepreneurs when it comes to registered agents.
At the end of the day, we think there are far more advantages than disadvantages when it comes to hiring a professional registered agent service for your company. A professional registered agent is inexpensive, provides a high degree of peace of mind, and makes it far easier to expand your business into additional states if you so choose.