A registered agent is an individual or a company that will be the LLC’s or corporation’s official point of contact in the state to receive service of process, other legal documents, and official communications from the state, and forward these documents and communications to the LLC or corporation for which it is acting as registered agent.
Conformitate24 ianuarie, 2023|Actualizatiunie 26, 2024
What is a registered agent for an LLC or corporation?
Anyone filling out the documents to form an LLC or corporation will see that the state filing office wants the name and address of the LLC’s or corporation’s registered agent. And if that LLC or corporation wants to qualify to do business in foreign states — that is, any state other than the formation state — it will have to provide the name and address of its registered agent in every foreign state, too.
Registered agent vs. resident or statutory agent
While every LLC and corporation law requires an in-state physical presence to provide statutory representation by receiving service of process and other legal documents, the terms they use to define the agent providing that presence vary somewhat.
- Registered agent: Most states use the term “registered agent”. This highlights the fact that the name and address of the agent are registered by the entity and are on file with the state.
- Resident agent: Some states use the term “resident agent”, which serves to emphasize that the agent must be a resident of the state.
- Statutory agent: “Statutory agent” is another term that may be used, highlighting the fact that this agent is required by statute. “Agent for service of process” is another term that is used, highlighting that the main function is the receipt of service of process.
- Registered office: Many statutes also require the LLC or corporation to set forth a registered office address. Not to be confused with a corporate or main office of a company, a registered office is the registered agent’s location in the state. It must be a physical address. A post office address is not sufficient.
Who needs a registered agent?
Every LLC and corporation formed under the laws of a state or the District of Columbia must appoint and maintain a registered agent in its formation state and in every state where it is qualified to do business as a foreign LLC or corporation. Other statutory entities, and particularly those that provide the owners with limited liability — such as limited partnerships and limited liability partnerships — are generally subject to a registered agent requirement as well.
This is a statutory requirement. It is required of corporations and LLCs by the state corporation and LLC statutes. It is not optional. And failing to comply with the registered agent requirement can result in statutory penalties.
Other state or federal statutes may require a registered agent in order to engage in certain businesses or activities. This is in addition to the state corporation and LLC laws requiring domestic and foreign corporations and LLCs to appoint and maintain a registered agent.
For example, interstate motor carriers must register with the Federal Motor Carrier Safety Administration and must designate an agent for service of process.
Often this is required for out-of-state businesses so that the administering agency, or a citizen of the state conducting business with the company, will be able to contact it, and if necessary, serve documents on it by contacting or serving the registered agent. A registered agent requirement imposed by a statute other than the business entity statute is sometimes referred to as a “special agency”.
An agent for service of process is also often appointed in contracts. A contracting party will provide the name and address of an agent upon whom any suits being filed against it arising out of the contract may be served. This provision adds a measure of predictability to the contract and helps avoid litigation over procedural issues. Unlike the statutory registered agent requirement — which provides the public with access to the name and address of the registered agent — only the parties to the contract have access to the agent for service of process information in a so-called “contract agency”.
A contract agency clause can be included in any contract or agreement.
However, it is commonly seen in, among others, loan agreements, guarantees, indentures, and franchise agreements. It is a fairly standard practice for lenders or guarantors to require that the borrowers appoint an agent for service of process in the loan or guarantee agreement.
What does a registered agent do?
The main function of a registered agent is to be available to receive service of process. Service may be delivered in person by a process server or sheriff or, in some states, by certified mail, return receipt requested. (A few states allow additional methods of delivery.)
A court can only make a ruling requiring a defendant in a lawsuit to take some action if the court has personal jurisdiction over the defendant. Valid service of process is required by the Due Process Clause of the U.S. Constitution in order for the court to have personal jurisdiction.
When filing a lawsuit against an entity such as a corporation or LLC, it can be difficult to know who is an authorized person to deliver the documents to. Not everyone associated with an LLC or corporation is authorized. And even if the plaintiff knows who is authorized — for example, corporate officers or LLC managers are generally authorized — those individuals may be hard to find. But because each LLC or corporation has to appoint a registered agent, and because the registered agent’s name and location are a matter of public record, the plaintiffs should have an easier time serving process.
Another important function of the registered agent is to be the point of contact for the Secretary of State (or whatever the business entity filing office is called). The filing office may send annual or biennial reports, notices of delinquency, and other important communications to the address of the registered agent. And because companies are required by statute to keep the name and address of the registered agent up to date, those important documents should be going to the proper person at the proper location.
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What is service of process?
As we noted, a main function of the registered agent is to receive service of process. So, what is service of process? Process is the document that provides notice that there is a lawsuit filed against the individual or entity. Service of process is the delivery of that document. Usually, this involves serving the defendant with a document called a summons. The summons is often accompanied by a complaint.
When an individual is sued, it is easy to figure out to whom to give the legal papers — that individual. But what about when it is a business entity such as a corporation or LLC? You cannot just go into a business and leave the papers with anyone who might work for the company. Service of process can only be served on someone the rules and statutes say can be served.
The service of process laws of every state provide that in the case of an LLC or corporation, process may be served on the registered agent. In most cases process can also be served on a corporate officer, LLC member or manager, a managing agent, or a general agent.
However, even when service on the registered agent is not required, plaintiffs often choose to serve the registered agent because the name and address are readily available and it avoids what can be timely and costly litigation over whether the individual served was actually authorized.
What other documents are served on a registered agent?
In addition to receiving service of process in connection with a lawsuit against the LLC or corporation directly, the registered agent receives other mission-critical documents, such as the following:
- Notice of garnishment proceedings against an employee
- Litigation documents once the lawsuit is underway, including motions or requests to produce documents
- Legal notices
- Government correspondence
- Other compliance-related documents
Although these documents might be very different, they all have one common element. Each one contains vital, time-sensitive information.
If an LLC or corporation has employees, it may be served with wage garnishments. A garnishment is an order directing a third party to seize the assets of a debtor to settle a debt. In the case of a wage garnishment, that third party is an employer, the debtor is an employee, and the assets are the wages owed to the employee. The wages of individuals can be garnished for child support, tax liens, student loans, and consumer debt.
Employers can be penalized for failing to comply with wage garnishment orders. For this reason, it’s very important to ensure that an LLC or corporation with employees has a professional registered agent handling service of process. Seven percent of United States employees have their wages garnished. And if an LLC or corporation receives a garnishment and fails to take action in time, it can be liable for the amount its employee(s) owes.
Similar to a garnishment is a charging order. This is a court order requiring a third party to make payments owed the debtor to the debtor’s judgment creditor. For example, an LLC may be served with a charging order requiring it to pay any distributions owed to a member to that member’s judgment creditor.
How is a registered agent appointed or changed?
When you form an LLC or corporation, you must designate an initial registered agent and registered office. The state won't approve your Articles of Incorporation or Articles of Organization if you do not do so. The requirement applies when you register to do business in another state (foreign qualify) by obtaining a Certificate of Authority.
In a number of states, the formation or qualification document must contain the registered agent’s acceptance of the appointment. The registered agent’s name and address also must be set forth in the LLC’s or corporations’ annual or biennial report.
However, it is not enough to have a registered agent at the time of formation or qualification. An LLC or corporation must continuously maintain a registered agent in its home state and in every state where it is qualified to do business.
The registered agent appointed upon formation or qualification will not necessarily be the registered agent forever. This is particularly true where the registered agent is an individual associated with the company rather than a professional registered agent. (Companies may decide to change professional registered agents, too.) Say an owner, member, lawyer, or employee is appointed. That person may leave the company’s employ and must be replaced as registered agent. Or if the company’s address is used as the registered office, and the company moves, the registered office address must be updated.
Changing the registered agent or office is a statutory transaction and the statutes vary somewhat. Often the states provide a change of registered agent or registered office form. In some cases, the change may be made on the annual report. In others, an amendment must be filed.
What happens if you don’t have a registered agent or your agent information is not accurate?
Having a registered agent is required by statute. And the information on file with the state — regarding who the registered agent is and where the registered agent is located — is also required to be accurate. There are penalties for violating those statutes. Under many statutes, the failure to maintain a registered agent and registered office, and a failure to notify the state upon a change of registered agent or registered office, is a basis for the state to begin procedures to administratively dissolve a domestic corporation or LLC or administratively revoke the authority to do business of a qualified foreign corporation or LLC.
In addition to the statutory penalties, being without a registered agent can put a company at risk in other ways.
Default judgments
The company may not receive a summons in a timely manner. For example, if a company is sued and there is no registered agent to receive the summons, the plaintiff can serve the company in another way — one that may result in the company not responding to the summons in time. In many states, for example, process may be served on the Secretary of State if attempts to serve the registered agent failed. And if there is no registered agent and no other person can be found, the plaintiff may be able to go to court and obtain permission to deliver notice of the lawsuit by “substituted service” — such as by publication in a newspaper — or other methods that may not result in actual notice.
If an LLC or corporation is validly served and does not respond, the plaintiff can obtain a default judgment. A default judgment can be entered against a defendant even if the lawsuit was frivolous and the defendant could easily have won the case. By the time the judgment is enforced against a company’s assets, it may be too late to undo the damage. And while courts do not favor defaults, and will overturn them, if the reason for the default was the LLC’s or corporation’s failure to comply with the state’s registered agent requirement, the court may be less inclined to do so.
Loss of good standing
A company risks its good standing with the state. The failure to maintain a registered agent by itself may be considered a basis for losing good standing. In addition, the annual or biennial report the corporation or LLC is required to file may be sent by the state to the registered agent. If the registered agent information on file with the state is not up to date the LLC or corporation may not receive the report and may not file by the due date. That will also result in a loss of good standing. And not being in good standing can have a serious impact on a business. It can prevent a company from bringing a lawsuit in the state, expanding into other states, or obtaining financing that it needs to expand the business.
Fines and penalties
An LLC or corporation may be hit with monetary penalties for non-compliance with statutory requirements.
Administrative dissolution
As noted earlier, the state can administratively dissolve an entity. If this happens, the owners may be exposed to liability for debts owed to business creditors. In most cases administrative dissolution can be remedied—but not in every case and not after too much time has elapsed.
For more information, read Why you need a registered agent.
Who can be a registered agent?
The minimum qualification to serve as a registered agent is pretty simple. The registered agent must be an individual resident of the state or a domestic or qualified foreign business entity with an office in the state. The one restriction in most states is that the LLC or corporation cannot act as its own registered agent.
For entities that are formed or qualified to do business in a state where one of the owners, managers, officers, or employees resides, the temptation may be to simply appoint one of these individuals as the registered agent. Another temptation is to have the entity’s attorney serve as the registered agent. Although expedient, these solutions usually are not the best option. An individual may not be at the registered office when process is delivered. Or they may be busy with their own work and forget to forward the documents to the LLC’s or corporation’s attorneys or otherwise may not be trained on what to do with these important and time-sensitive documents. Individuals also quit, retire, or move, and a new registered agent and office must be appointed.
What are the benefits of using a professional registered agent?
It is often a better strategy to choose a professional registered agent because it is essential that the registered agent always be ready, willing, and able to perform two critical functions mentioned earlier:
- receive important state and legal documents
- relay these documents to the appropriate party quickly and effectively
A professional registered agent — as the name implies — is a company in the business of providing registered agent services. With a professional registered agent, you can be confident that there will be someone at the registered address during all standard business hours and available to be served with a legal notice. There is no worry that the registered agent will be on vacation or away from the office when service of process is attempted. Moreover, receiving legal notices in front of customers (and if operating a home-based business, in front of your family, friends, and neighbors) can be uncomfortable, to say the least. This is more likely to happen if you use the business or home address as the registered office address than if you use a professional registered agent’s address.
Another key factor is that promptly relaying the information is essential, especially in the case of a lawsuit — which usually requires a response within a matter of days to avoid a default judgment. Receiving and forwarding legal documents is the professional registered agent’s entire job, not simply an interruption in an otherwise busy schedule.
Finally, dealing with paperwork and keeping up with industry requirements and regulations is time-consuming. A professional registered agent is focused on this area of the law and, in the case of CT, has a team of attorneys and contacts with state legislatures that monitors and responds to changes in the law.
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CT Corporation has been safeguarding businesses as a professional registered agent since 1892.
Trust CT Corporation as your professional registered agent to handle vital legal communications that help your organization avoid risk of fines, penalties and unanswered service of process.
When to use a professional registered agent
The choice of registered agent, like the choice of entity type, formation state, and entity name, is one of the earliest and most important decisions that a business entity's owners can make.
The following questions can help you decide whether having a professional registered agent makes sense for your LLC or corporation. If you answer “Yes” to any of these questions, you should strongly consider appointing a professional registered agent.
- Does your company do business in multiple states?
- Did you incorporate or form in a state other than where you do business? If a corporation or LLC will be doing business in multiple states, it is an advantage to have the same registered agent in each state. It is much easier to keep track of who the registered agent is in each state and lessens the administrative burden.
- Will the company have subsidiaries? Each subsidiary will have to have its own registered agent in its formation state and in states where it will qualify. Keeping track of the comings and goings of individual registered agents for each subsidiary can be a difficult task. Having the same registered agent for the parent and each subsidiary — which can be done by using a professional registered agent — reduces the administrative burden for the person responsible for compliance with the registered agent requirement.
- Do the individual owners, employees, or other individuals who might be named as registered agent set their own business hours or work from multiple locations? Remember, the registered agent needs to be at the statutory location during business hours.
- Will your address ever change? If you plan on using the business’ address or an individual’s address as the registered office, you must remember to change the registered office if that address changes.
- Do you want to keep your address private? The address of the registered agent is publicly available. Using a professional registered agent means the professional registered agent’s address is the one that will be made public.
- Do you see clients or customers at your home or business address? If this is the case, you probably would prefer they not see a sheriff or process server coming to serve papers — and have your clients or customers wonder why the business is being sued.
- Are you concerned about keeping up with the compliance obligations of the governing business entity laws and the consequences of failing to comply? If this is the case, you may want to go with a professional registered agent. In addition to the professional registered agent’s statutory responsibilities of receiving and forwarding documents, professional service companies often provide a full range of services for LLCs, corporations, and other types of business entities to help them with their compliance needs.
What to look for when choosing a registered agent
A registered agent should be reliable, accurate, and consistent. They should be available and physically present at the registered office during normal business hours. This ensures any hand-delivered legal documents get proper attention.
They should also know the business entity and compliance rules, have professionally trained staff with expert knowledge on how to properly handle and forward SOP papers, have state-of-the-art processes in place to deliver crucial documents to you, and follow up with you regarding delivery.
It is also important to have a registered agent that has the coverage and expertise to support your business as it expands into other states where a registered agent will be required.
For more information, see How to Chose a Registered Agent.
Conclusion
Choosing a registered agent for a corporation or LLC is a very important decision. It is a vital role. If not done properly, it can have disastrous consequences for the company. It is for that reason that professional registered agent companies exist. Every person who is responsible for deciding who should be the registered agent in the home state or a foreign state should seriously consider appointing a professional registered agent.
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