No matter where you’re starting your business, if you’re forming an LLC or corporation, you’re required to have a registered agent and a registered office. But this doesn’t mean you need to hire a registered agent service.
A registered agent is simply a person or entity appointed to accept service of process and official mail on your business's behalf.
You can appoint yourself, or in many states, you can appoint your business to be its own registered agent. Which really begs the question, why hire a registered agent at all?
Why do states require business entities to have registered agents?
The registered agent requirement came about as an aspect of due process. A lawsuit against your business cannot move forward in court without your business being properly notified first. The registered agent must have a physical address within that state and be available during business hours so someone suing you can easily find you. This requirement gives the court an easy way to notify you. This also eliminates the possibility of big corporations hiding behind thousands of employees. The registered agent is your business’ point of contact with the state and for service of process. The theory behind the requirements of the listed registered agent is to ensure your business maintains a reliable way to be contacted.
Reasons why businesses hire registered agent services
The majority of small businesses (10 employees or less) do not hire registered agents. That said, there are some specific reasons why some business owners do opt to hire registered agent services; you’ll find those reasons listed below:
No desire for extra paperwork
Registered agent services typically cost somewhere between $100 and $300 per year. For some business owners, it’s well worth the fee to not have to track the official notices and annual report due dates with the state. If you hire a registered agent service your registered agent should have a system in place to track and notify you when annual reports are due to keep your business in compliance with the state, so you don’t have to worry about it. Also, all your important documents will be kept in one place and you don’t have to bother keeping track of notices.
If you list yourself as your business's registered agent, you’ll probably be listing your home address as the business’ point of contact. This puts your home address on public record and anyone who wants to officially contact your business (typically with tons of junk mail) will find your home address. For some people, this is a concern; others don’t care. But if this notion worries you, you can hire a registered agent (the agent’s address will be listed on public record, not yours). In the day and age of “Big Data”, there are many websites out there scrapping this data from state databases, putting it on the web, and/or selling it, so your personal info could be all over the place indefinitely. State records are permanent, so while it may not seem like a big deal now, you may not want your personal name and home address on the web 10 years from now.
No physical address
One problem that many small, web-based businesses encounter when dealing with the bureaucracy of maintaining a business entity is that their business has no physical location. If the business owner doesn’t want to list their home address, hiring a registered agent service solves this problem, as service of process and official mail from the state can be delivered to their registered agent and their home address stays off public records.
Odd business hours
A registered agent not only needs a physical location, but they need to be available during regular business hours to accept service of process and official notices from the state. Some business owners who aren’t available during business hours opt for registered agent services, so they can maintain irregular work hours.
Business locations in multiple states
In each state your business operates, you’ll need to register with that state, and in every state you register, you need a registered agent with a physical location in that state. For this reason, many business owners choose to hire registered agent services in order to comply with state regulations and to be sure all important notices to the business are kept in one place, with their registered agent.
Registered Agent Market Share
If you decide to hire a registered agent service, it might be interesting for you to take a look at the registered agent market share It also might be helpful to take a deeper look at what each registered agent and see what they offer for services. Here is what registered agents should offer with their registered agent services. If you decide to save some money and be your own registered agent, it is easy to list yourself on your formation or registration documents and skip the entire vendor search.
The Bottom Line
For many small businesses, hiring a registered agent service just doesn’t make sense. They have a regular storefront, keep normal business hours, only operate in their home state, and they aren’t concerned about their privacy. If that’s you, you should do fine without a registered agent. The business owner would be the best personal name to list down as the registered agent for the business so that an important document doesn’t get dropped off with an employee. But if any of the reasons listed above strike a chord with you, hiring a registered agent might be a great move.