Important Facts About Registered Agents That You Might Not Have Been Told.
When forming your company you designated a Registered Agent. Do you remember who? Are they still in business? Are they an attorney? Does it matter?
Knowing the answer to all of these questions might just save your business. Here is why-
A registered agent (or statutory agent in some states) is a third-party person or business designated by a corporation or LLC to receive legal and official correspondence on behalf of the company. These correspondences include service of process, state paperwork, tax information, and court summons. Registered agents are the designated official point of contact for your business. The registered agent must reside in the state in which the corporation or LLC is located or doing business in, and have a physical address (not a P.O. Box) in those states. Registered agents can be a member of your company or a third-party such as a law firm.
A registered agent is required for any business that wants to incorporate or become a limited liability company. Your company will need a registered agent for each state where the company is registered and does business. You can designate yourself as a registered agent for your business, but you may only act as the registered agent for the state you reside and have a physical address in. For other states where your company exists, you must find a registered agent in that state.
A registered agent’s address is not the same as a companies address. Your business must also have its own address which can be a physical address, a P.O. box or, virtual mailbox. If you need a company address or wish to further your privacy, you should look at our Virtual Mail Box Service as well.
The registered agent should exist in the proper state and have a stable physical address there.
Since a registered agent is a designated representative of your business, it is important that they be a responsible party. If they are negligent in their duties as registered agent, it could negatively impact your company in business and law. For example, if they fail to send you timely notices on litigation, you and your business could receive a default judgment that could become very costly to address.
Your registered agent should be available at all business hours. A registered agent who is always on vacation or not present at the address is likely to hinder timely delivery of documents to you or worse, they may not be able to receive documents that require a signature.
Other considerations in choosing a registered agent are their policies and business practices. How easy is it to contact them? How do they agree to handle your company’s documents? Do they perform additional services for you? Do they use a third-party to process documents received by them? Clearly, an attorney would should know how to handle documents, keep regular business hours and have the ability to preform other business services for you. Additionally, having an attorney as your Registered Agent means you can utilize Attorney-Client privilege. This is particularly important to business owners who value their privacy.
If you wisely selected an attorney as a registered agent, Congratulations! But, there are still things to consider.
Selecting an attorney as your Registered Agent was wise choice so long as the attorney you selected is practicing law through out the life of your business. When attorneys retire or stop practicing law, they are required to resign as a Registered Agent via the Secretary of State’s Office. They may not be required to inform you of their leaving the practice of law. Therefore, should your business be named in a lawsuit, and your attorney is no longer practicing law, it would be difficult if not impossible to serve your the notice which, as stated earlier can result in a default judgement. Keep in mind that a default judgement is nearly impossible to reverse and extremely expensive. So, ask yourself- who did you name as your business’s Registered Agent? Are they still in business? Is their contact information up to date? Most importantly, are they suitable Registered Agents? Do they have the experience and mental fortitude to handle the responsibility? If you don’t know the answers to this, your business could be in jeopardy.
Some Important Facts About Your Business’s Mailing Address.
A Registered Agent is not the same as a physical or mailing address of the company. Most states require a business to have a physical address, regardless of where the company is actually conducting business. Companies operating exclusively on the Internet still must have a physical presence somewhere, dictated by where most of its operations are conducted, where it accept regular mail or where one or more of its owners sit. This is not the address of the Registered Agent.
Virtual Office
If you don’t want your personal address associated with your company, you can use a “virtual office”. A virtual office is a place where you can rent space or services on behalf of your company. In turn, you use the virtual office as an address for your business.
How does a virtual office service fit into the mix? For starters, a virtual office is not the same as a registered agent. A registered agent (or registered office) only receives your legal documents on behalf of your company. A registered agent does not receive your general mail, and may not have the processes to deal with regular mail. A virtual office can function as an address for your regular office. It must be permitted by the United Stated Postal Service. A virtual office has the processes and permission of the USPS to handle your mail and deliver it to you dependably.
To be clear, even if your Registered Agent says they can handle and process regular mail for your company, and that it’s okay to indicate your Registered Agent’s address for the physical mailing address of the company — it’s actually not okay unless that Registered Agent is a valid USPS Commercial Mail Receiving Agency (or CMRA), and you’ll know that because the Registered Agent asks you to fill out USPS Form 1583. If they don’t do this, they are violating USPS regulations, and you therefore open you company up to a claim of fraudulent filing by a plaintiff’s attorney if your company should be sued.
Preserving Liability Protection: Why This Matters
If your LLC is sued, you want the LLC to protect you from personal liability. This is one of the primary purposes of the LLC, but it is possible to “pierce the corporate veil” of a LLC under certain circumstances. Two of those circumstances would be if the LLC is “engaged in fraudulent behavior” or otherwise “fails to follow corporate formalities” (as defined by the Operating Agreement or in Statute).
If you claim the LLC’s “physical mailing address” is the Registered Agent’s address, but you don’t actually control the Physical Agent’s address, then you leave yourself open to a claim by the shrewd plaintiff’s attorney that your LLC is either engaged in “fraudulent behavior” (i.e. by filing fraudulent paperwork to the Secretary of State) or is not “following corporate formalities” by not abiding by the statute that requires disclosure of where the company operates. If such an argument is successful in litigation, then that means the owners are potentially personally liable for the debts and obligations of the LLC.
This is why L4SB does not permit LLC’s to use us as both their Registered Agent and physical mailing address. You want the LLC to be in control of its physical mailing address (i.e. with a legal mailing address maintained by the USPS), so that the shrewd plaintiff’s attorney cannot use such an excuse to pierce the corporate veil, and potentially hold the owners of our client’s LLC’s personally liable.
As you can see, there is so much to selecting a Registered Agent than simply writing one down on your incorporation paperwork. Its a serious undertaking that can have some real repercussions for a business that did not take the time to select someone who is qualified. Don’t leave the task of collecting what could be some of the most vital communication your company could receive to a stranger- or an incompetent one at that! Afterall, your business depends on it.
Law 4 Small Business, P.C. (L4SB). A Slingshot company. A little law now can save a lot later.
