What Are The Possible Disadvantages Of Being Your Own Registered Agent?
When a business is formed in the U.S., part of the requirement is for the business owner to designate a registered agent. The registered agent formally represents the company when receiving correspondence from the state government. Many private business owners choose to serve as their own Registered Agents instead of designating another person or entity. However, this is often not recommended for a number of reasons.
This article includes a discussion on why a business owner should not be his own registered agent. Although there are a few advantages, the number of risks overshadows the benefits. At the end of the article, you will have a better understanding of the reasons.
Before diving into this discussion, it is important to understand the role and responsibilities of a Registered Agent.
The Role of a Registered Agent
A registered agent is a representative of your company. It can be a person or a business entity. The registered agent receives official communication from the state government on your company’s behalf. When the agent receives a document, he notifies you of the receipt. He scans the document and creates a digital copy of it as a backup. Then he sends the document to you.
The registered agent can receive many types of official documents. Among these can be tax documents, reminders from regulatory agencies about report filings and compliance, forms from your state government, service of process in litigations, and more. Your registered agent also has the responsibility of keeping a calendar of filing deadlines so you will not be late in filing.
You can designate anyone to be your company’s registered agent. It can be a friend, a relative, an employee, and even yourself. You can also choose to assign this role to a business professional like your accountant or attorney. The third option is to assign this role to a dedicated registered agent service.
The Disadvantages of Serving As Your Own Registered Agent
Although you can assume this role yourself, you take on some risks by doing so. Here are the disadvantages that make this an undesirable approach.
1. You Need To Be Reachable At Your Place Of Business During Business Hours
This is the biggest disadvantage. When you serve as your company’s registered agent, you are expected to be at your business location during business hours at all times. That means Monday through Friday, from 9:00 in the morning to 5:00 in the afternoon. You cannot take any time off. You cannot even step out of the office for a break.
The reason for this requirement is that when an official document is delivered to your place of business, a designated company representative must be there to receive it. If the registered agent is not there, the delivery will not be made. This can have dire consequences if you miss the delivery of a crucial document. For example, if you miss the delivery of a service or process, you will not know that your company is being sued, and this can create a mountain of problems for your company down the road.
Needing to be at your place of business during all business hours can place a tremendous amount of pressure on you among all of the other demands on your time as the business owner. For this reason alone, it is not a good idea to be your own registered agent.
2. If You Are Occupied, You Might Not Get An Important Delivery
Being physically at your place of business during all business hours is not enough. As the registered agent, you must be available to receive the delivery. If you are at your business, but you are in a meeting or on the phone with a client, you will miss the delivery.
3. You Are Restricted To Doing Business Only In Your Home State
If your company does business in other states, you must have a designated registered agent for that state. Because you must be at your place of business during business hours, you can only be in one location at a time. If you want to assume that role yourself, you would not be able to expand your business to other states.
This problem still exists if you designate another individual to be your registered agent because that person can only be at one location at a time. You still would not be able to have a physical location in other states. If you want to expand beyond your home state, the only solution is to use a registered agent service that operates in all 50 states. When you designate a business entity to be your registered agent, the business entity’s branch in each state can receive official documents for your company. You would not need to designate a separate registered agent for each state.
4. The Address of A Registered Agent is Public Information
If your business is based in your home, you probably want to keep your personal address out of the public records as much as possible. However, when you serve as your own registered agent, you have to enter your home address because that is your place of business. If you want to minimize exposure to your private address, you should designate someone else to be your registered agent.
5. If You Get Served, Your Employees and Customers Will See It
There is nothing more damaging to your business reputation than for a customer to witness that you got served with a lawsuit. When you act as your own registered agent, this can happen. If your employees see this, it can damage company morale. To avoid this embarrassment and stress, it is better to designate someone else as your registered agent.
The Best Choice For A Registered Agent
Now that you understand more about the risks around serving as your own registered agent, you should consider the best option, which is to hire a professional company that provides registered agent services.
Not only will you benefit from a service with extensive experience in company formation and compliance, but the registered agent company may also provide additional services. They can provide assistance in keeping track of your filing deadlines, help you with filing your annual reports and advise you on compliance issues. They have a team of people trained in this area and can support you when you have questions.
The biggest advantage in using a registered agent service is that they normally have a presence in every state in the U.S. That means you can open up a location in any state and not have to be concerned about designating a new registered agent in that state. You just have to notify your registered agent service that you added another location in a state.
It is obvious that a registered agent service will provide many benefits. The challenge is which company to hire. This site has information on some of the top registered agent services in the country. Here is a summary of the most popular choices:
– Zen Business: Zen Business offers registered agent service for $99 a year. Their website has an easy-to-use interface. Their site has tools that help you keep track of your deadlines and annual reports. They also have a great reputation for providing excellent support to their clients.
– Incfile: This company has been a trusted provider of LLC formation and registered agent services for many years. Their rates start at $119 a year. If you have not formed a company yet, they can help you create an LLC and provide registered agent service for free.
– Northwest Registered Agent: Northwest’s regular fee is $125 a year. However, if you have not yet formed your company, they offer a company formation package for $39 which also includes 12 months of registered agent services. A unique service that Northwest provides is a scan of every document that they receive on your behalf. You will be assigned to your own account representative who can give you customized support.
– LegalZoom: LegalZoom provides similar services as the other registered agent companies above, but their fees are $299 a year. Because they do not provide anything extra with this fee, you will get a better value if you go with one of the other three services.
You can legally assume the role as your own registered agent, but the disadvantages associated with that do not make it worth your while. The only possible advantage is that you might save some money by not hiring a registered agent service. However, the amount of money you save is very small when compared to the bigger risks and additional hassles that you take on. Some LLC services such as Northwest and Zen Business include free registered agent services in their packages. We recommend using a highly rated registered agent service to make the most out of the advantages that they provide.