What is a Registered Agent? The Pros and Cons of Acting As Your Own Registered Agent.
Many entrepreneurs know that when you incorporate your small business, whether your entity is an LLC, Corporation, or C Corporation, you will need a registered agent (RA). In many states, having a registered agent is a requirement, but why exactly do you need an RA? And why would you need to hire one if you could do it yourself?
What is a Registered Agent? The Pros and Cons of Acting As Your Own Registered Agent.
Many entrepreneurs know that when you incorporate your small business, whether your entity is an LLC, Corporation, or C Corporation, you will need a registered agent (RA). In many states, having a registered agent is a requirement, but why exactly do you need an RA? And why would you need to hire one if you could do it yourself?
What Is A Registered Agent?
Also known as a statutory agent, an RA serves as a point of contact between a business and the state, accepting official legal and tax documents on behalf of the business and helping the company comply with state law.
Below are some of the most commonly found documents a registered agent may receive and be responsible for:
- State Tax Forms - These include franchise tax returns, sales tax returns, and other tax-related documents.
- Service of Process - The legal process for formally delivering certain legal documents (including subpoenas, lawsuits, or other legal processes or notices). An agent for service of process can accept the legal documents on behalf of a person or business and forward them promptly to the appropriate parties.
- Corporate Governance Documents - An RA may be responsible for receiving, forwarding, or filing documents from or to the Secretary of State, including shareholder minutes, resolutions, articles of incorporation, or any other corporate governance required by state law. A registered agent may even be the one to retain all these documents for the business.
- Annual Reports - This includes tax return documents and updated information about a company’s structure, officers and directors, and its current registered agent.
- Regulatory Compliance Documents - An agent may receive and forward documents such as permit applications and various renewal forms.
Can Anyone Be A Registered Agent?
A registered agent can be either an individual or another business entity as long as they meet the requirements of their respective state. The main requirement put forth by the Secretary of State is that the person must be a resident of that state and have a physical address, not a PO box. Another entity can be used as the registered agent; however, there can be restrictions around using the same entity as its own registered agent.
For example, in the case of an organization in Texas, it may not represent itself. Meaning that Your Business LLC cannot list Your Business LLC as its registered agent. However, it can designate an employee, officer, or owner of the company as its RA. Alternatively, it can hire a third-party business entity, such as a service company or an individual, as long as consent is provided.
It is also legally acceptable to be your own registered agent.
Should You Be Your Own Registered Agent?
If anyone with a physical address can become a registered agent, then why can’t you be your own? While many small business owners work alongside an organization, some decide that they want to be their own RA — and that’s legally acceptable. Remember that with great power comes great responsibility on top of all of your other existing entrepreneurial duties. If you’re planning to act as your own registered agent, there are some considerations to keep in mind before getting started.
Pro… It’s less expensive to designate yourself as an RA…technically.
The most obvious advantage to being your own registered agent is the palpable effect it has on your wallet. Appointing yourself as an RA can be less expensive than paying an outside organization for assistance if you’re on a tight budget. Although, it being less expensive only holds true for as long as the opportunity cost of your time/rates stay under the budget of the potential services rendered by an outside agent.
Con…You’ll need to be available during general business hours
That doesn’t seem so hard, right? Think Monday through Friday during general hours of operation, like 8 AM to 5 PM. Not only will you need to be available to accept service of process during these hours, but you will also need to be a resident of the state and present at your designated physical address. (Another requirement for registered agents since P.O. Boxes are not considered to be an acceptable form of address.)
While much of this will depend on the entrepreneur’s circumstances and the nature of their small business, for most, the biggest con of any task you decide to handle on your own IS that it takes time. Any moment you spend doing administrative duties, like RA work, is time not spent on developing your business. While being your own registered agent is not extremely demanding, the task would rely on your availability during normal business hours. Not only would it cost time, but there is also an additional risk. If your work takes you out of the office often, whether, for an offsite meeting or business trip, there is the potential to miss important documents or legal service, both of which could lead to long-term consequences.
Pro…You will have a higher degree of control
If you find you have a better handle on your business when the majority of work passes through your hands, you may want to be your own registered agent. As your own RA, you would have direct control over the process of receiving and forwarding all of the legal and tax documents.
Con…Loss of privacy and security
Remember, whoever you choose as your registered agent needs to list their name and address on the company’s formation documents. These documents are publicly accessible to anyone. This may only be of concern to work-from-home business owners in terms of privacy and security, but don’t forget the documents that pass through an RA’s hands.
Every entrepreneur is different. Some aren’t phased at the thought of being served confidential legal notices, like a court summons or lawsuit paperwork, in public. Others might be extremely embarrassed and worried that the act could damage their reputation. If you fall into the latter category, working with a registered agent service provides an added layer of security. They will accept the documents on your behalf so that no unwanted visitors show up at your designated address, giving you and your business some privacy and peace of mind.
Should You Hire A Registered Agent?
In addition to all of the above, what else is there to mull over before hiring an RA?
1. Physical address
One of the great things about hiring a registered agent service is the convenience of a static address. If you are a budding business, your address may change within the first few years of formation. Avoiding the hassle of the address change alone may be worth it for some.
2. Do you already have the expertise to be a registered agent?
If you are a seasoned entrepreneur, CPA, or lawyer, you may already have all the prerequisite knowledge to be your RA. For those who don't, a service company's convenience, turnaround time, and expertise are probably the wise choice.
3. Are you a generally organized individual?
Some legal documents you may receive as an RA include, but are not limited to, general paperwork like annual reports, franchise tax forms, and renewal reminders.
If you are naturally organized when it comes to paperwork and time-sensitive materials, then you’re likely to stay on top of everything as an RA. However, if you struggle with organization and worry important documents could slip through the cracks, you might want to designate a third-party RA. They will be able to keep your paperwork organized and passed along to you in a timely manner, so your business doesn’t fall out of good standing with the state.
How much does a registered agent cost?
While we cannot quote you on an exact price range, as with most business services, the cost of a registered agent varies greatly depending on what provider you choose and the scope of work offered. We’ve found annual services ranging from under $100 for minimal offerings to $300+ for enhanced services. It can top off at even more for organizations needing bespoke reporting or complex compliance solutions.
Below is an example of the tiers of service you may find offered by the average 3rd party registered agent or service company.
- Basic Service: Usually includes typical receiving and forwarding of official state and legal mail. May also include the filing of annual reports.
- Enhanced services: Services such as mail and package forwarding, cloud storage, and document scanning. Enhanced services tend to offer compliance coverage for fees and penalties if your company falls out of compliance under their watch.
- Custom services: Usually for larger businesses or companies with unique needs and compliance o
- Supplemental services: Including LLC formation, identity theft protection, and template documents
Best registered agent services
Overall, we would say that hiring a 3rd party registered agent is a great option. For most small businesses, the meager annual fee is well worth the time, effort, convenience, and even dollars saved. Here are our top picks for registered agent services.
With top-tier reviews, customer service, and a wealth of services offered, Northwest Registered Agent is a great pick for those with the budget. Their basic RA package starts at $39 for the first year, and has a flat rate of $125 each year after that
Also well reviewed, ZenBusiness stands out as one the most well-rated but affordable options. With a 60-day money-back guarantee, they’re perfect for those on the fence about whether they need RA services.
This company is Texas local. They offer many of the same core services as national brands, starting at $35 a year. Because a local address is needed, it should also be noted that some national companies end up commissioning local state companies anyway. We would recommend shopping local entities as well before immediately choosing a brand name national service.
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