Designating a registered agent is a crucial part of the formation process for any American business entity, as this ensures that your state government has a reliable means of contacting an official representative of your company. Quite a few entrepreneurs consider being their company’s own registered agent, but is this a good idea for your business?
We put together this article as a way of addressing some of the risks of serving as your own registered agent. While there are some advantages to doing so, in our opinion the negatives usually far outweigh the positives. With that said, let’s get down to the details!
What exactly are the risks of being your own registered agent, and how would it affect your business if you handled this role yourself?
What Is a Registered Agent?
Before we tackle the specifics, let’s quickly discuss some general aspects of the registered agent. A registered agent is an individual or a business entity that receives important document deliveries from your state government. Then, your agent will inform you of the delivery, scan the forms to create digital backup copies, and forward them to your business location.
The specific documents that your registered agent handles include service of process for lawsuits and compliance reminders for document filings like annual reports, along with tax forms and other docs from your Secretary of State’s office. The registered agent often will help you keep track of deadlines and due dates as well.
You have several options for who can serve as your registered agent. As far as the DIY options go, you can designate yourself as your company’s registered agent, you can recruit a friend or family member to handle it for you, or you can assign the role to one of your employees.
If you’re more interested in having a professional take the reins of this position, you could designate your lawyer or accountant, or you can hire a registered agent service.
Risks to Being Your Own Registered Agent
While you are legally allowed to be your own registered agent, there are several significant risks to doing so. In our opinion, these factors make it so that serving as your own registered agent isn’t a good idea in most cases.
Let’s walk through these risks one by one to see if you agree!
1) You Have to Be Available During All Business Hours
The most obvious drawback to serving as your own registered agent is the fact that you’ll need to be present at your place of business from 9am until 5pm, every Monday through Friday, with no exceptions.
You would never be allowed to take a day off for any reason, and you couldn’t even step out to go to lunch or to run errands.
This is because the registered agent needs to be available to receive document deliveries from the state during standard business hours, and in many cases the delivery will simply not be made if you aren’t there. That means you’re running the risk of missing a service of process delivery anytime you leave your business location during these hours, and a lawsuit could proceed against your company without your knowledge.
2) You Could Miss an Important Delivery
Even if you’re present at your place of business every weekday during standard business hours, you could still easily miss a delivery.
Whether you’re on the phone with a customer, helping a client in person, chatting with an employee, etc., the person who attempts delivery of your documents may determine that you are not available to accept it, even if you are physically present.
3) You Can Only Conduct Business In Your Home State
Every company needs to have a registered agent in each state it does business in, and you cannot expand to a new state if you do not designate an agent with a physical location in that state.
Therefore, if you serve as your own registered agent, you will be limited to conducting business only in your home state, because you obviously can’t be two places at once.
This limitation also affects options like having a business associate, friend, or family member serve as your agent, and it even prevents you from expanding your business if you hire an attorney or accountant to be your registered agent. Only a professional registered agent service with offices in all 50 states can handle your expansion without requiring you to enlist the services of a new registered agent.
4) A Registered Agent’s Address Is a Matter of Public Record
This one is more of a big deal if you’re operating a home-based business. In this situation, you would be required to enter your personal address into the public record, which obviously has some significant privacy issues involved with it.
If you run a business out of your own home and don’t want to make your address widely available, you shouldn’t be your own registered agent.
5) Your Customers or Employees Could See You Get Served
Having a lawsuit filed against your business is stressful enough to begin with. However, that level of stress could increase significantly if you serve as your own registered agent and have to receive service of process in front of your customers or employees.
If you would rather avoid this scenario, it’s in your best interests to outsource your registered agent service.
Who Should Be Your Registered Agent?
If you would like to avoid all of the risks described in this article, the best way to do that is to hire a professional registered agent service. These companies are entirely focused on being the best registered agents available, and they usually provide some sort of additional features as well ― usually in the form of a compliance calendar, or assisting you with your annual reports. You also receive access to their helpful customer support departments.
The best part of hiring a professional registered agent service is that they typically have offices in all 50 states, which means you can easily expand your company into an additional state without having to get a new registered agent for that state. Instead, you can simply add a state to your account with your registered agent service.
We think it’s a no-brainer to hire a professional registered agent service, but the trickier question is which one you should use. We have a comprehensive guide to the best registered agent services available on this site, but if you’d rather take a look at a quick overview, here’s our three favorite options:
- 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 $225 formation package that includes a year of registered agent services.
- 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.
- LegalZoom: This is another very popular option that more-or-less does the same thing as the other services, but charges $299 per year. In our opinion, the affordable registered agent services above are far better deals and more than half the cost.
There’s nothing legally stopping you from serving as your own registered agent, but common sense might hold you back.
There are many negative aspects to being your own agent, and the only positive is saving about $10 per month instead of paying a professional registered agent service. If you do designate yourself as your company’s registered agent, you’ll be subject to the hassles and privacy issues discussed in this guide.
For the vast majority of our readers, we would recommend hiring a reputable professional registered agent service to handle this important aspect of business compliance.
It’s also worth noting that many LLC services — like Zen Business and Northwest — offer one year of free registered agent service in every package.