A Registered Agent and Why You Need One
A corporation and its owner(s) are two separate and independent entities. Because of this legal separation, a majority of state laws require the name of a contact person, known as a registered agent, as part of the incorporation papers.
Purpose of a Registered Agent
A registered agent is a person who is registered in the state of incorporation to receive important documents from the state or the courts of that state. These documents include legal documents (e.g., tax documents, summons, lawsuit papers, etc.) and notices from state agencies. The reasoning behind having a registered agent is to avoid having important legal papers being handed to anyone at your business location or at your home. Even though efforts have been made to standardize them, rules regarding selection of a registered corporate agent or resident agent still vary by state. Before you incorporate, know and understand the registered agent requirements in your state of incorporation.
Registered Agent Requirements
If you incorporate in the state you are doing business, an officer, director, or employee can usually be your contact or registered agent. Some states allow your corporate attorney to also serve as your corporate registered agent as long as he/she reside in the state of incorporation. If you incorporate in another state but are not located there, you will likely be required to hire a resident agent.
Fees associated with resident agent services will vary by state and services offered. Some companies simply act as the registered agent and forward paperwork as they receive documents. Other resident agent services will help follow-up on filing notices required by the state. The selection of a registered agent is not a trivial task. A registered agent that fails to perform his or her duties can significantly affect a corporation.
Why Having a Good Registered Agent Is Important
One of the main reasons to have a good registered agent is so the corporation will know when it is being sued. If a corporation’s registered agent is served, then the courts will find that the corporation has notice of a lawsuit. If a corporation’s registered agent fails to forward a petition to the corporation, it will mostly likely fail to file an answer in the lawsuit. If a corporation fails to file an answer within a designated time period, then a plaintiff may obtain a default judgment against the corporation. A default judgment results in a waiver of any defenses the corporation may have been entitled to present to the court.
The default can also result in the payment of a large judgment. Similarly, the state will send important notices to the registered agent. If a state implements a new filing requirement and the registered agent forgets to forward the notice, the state can fine the corporation or revoke its articles of incorporation, depending on the nature of the change.
Consequences of Not Obtaining a Registered Agent
With the pitfalls that come with less than competent registered agents, some corporations may be tempted not to retain a registered agent. This is not usually an option. Virtually every state has a requirement for some type of registered agent, corporate registered agent, or resident agent. Failure to maintain a resident agent can result in fines or loss of coprorate status. If you are not sure about the requirements for registered agents in your state, consult with an attorney that specializes in corporate law.