When forming or registering a business entity in any of the 50 U.S. States, a “registered agent” for service of process is required. Amid the myriad other considerations when forming a company, it’s tempting to fulfill this statutory requirement by any means necessary. But, not every registered agent is the same.
The registered agent is designated on your company’s articles of incorporation or articles of organization at the time you form your new business. On paper – literally – the registered agent’s role is simple. It’s a physical address (in that state) where courts, government agencies, and process servers can deliver legal and government notices to your business. Beyond that, your company has a lot of options.
To help you through the decision-making process, we’ll unpack three key considerations every startup should make when choosing a registered agent.
Choose a Registered Agent that Supports Your Growth
Many entrepreneurs choose to incorporate their business in Delaware or Nevada for privacy or tax reasons. Then maintain a place of business where they actually work, like California or New York. There’s nothing wrong with this model, but consider that a registered agent is required in each state where the business is registered. In practice, that means your business needs to designate a registered agent where it incorporates. And separately, need a registered agent with a physical office anywhere else it registers as an out-of-state entity.
Consider another example. Fast-growth companies, especially those in the healthcare and technology industries, may quickly need to form multiple entities or register in multiple states to comply with diverse nexus laws.
In both of these cases, wise entrepreneurs will appoint a single registered agent company that meets state requirements as they scale. This simplifies practical considerations, like accounts payable, as well as more impactful ones. After all, the registered agent handles service of process and critical legal notices. Using one reliable registered agent helps ensure your business receives these notices in a timely manner and can effectively respond.
Consider Your Business’s Long-Term Compliance Needs
Your business will have ongoing compliance obligations to secretaries of state, taxation authorities, and licensing agencies. Any seasoned business owner will tell you, these requirements can be complex and distracting from the company’s mission.
When you’re choosing a registered agent for your business, consider the foundation you’re building on. Most business owners would rather outsource additional compliance responsibilities so that they can focus on the strategic vision.
Some companies provide only registered agent service, and they might be very good at it. But, your business may require additional support with legal entity registration, industry licensing, and tax compliance. As you decide on a registered agent provider, it’s a good idea to do some additional due diligence. What else does that company offer? How does it fit in with your long term vision and needs?
On a more tactical level, consider the tools that your registered agent makes available to you. For example, when your business is served with a lawsuit or subpoena, you have a limited time to respond. Failure to do so can result in dramatic consequences you’d rather avoid.
Any registered agent company will have a process for delivering those documents to you. However, some agents will still mail service of process to a central processing facility and then to you. Consider that each day in the mail is one less day your counsel can prepare a response. This becomes even more complicated if you have multiple entities in your corporate structure and need centralized visibility.
The right registered agent for your business will provide you with the technology needed to support your current business model and to do business in a digital era.
Making an Intelligent Investment
As you search for a registered agent vendor, you’ll encounter annual rates ranging from less than $50 per year, to over $400 a year. You might reasonably ask why. After all, isn’t it the same service?
The secret answer is, yes, it largely is the same. The registered agent industry has many companies competing for your business, and you’ll find pricing strategies (and gimmicks) designed to win your business.
While you probably want to reduce your overall administrative expenses, beware of deeply discounted or “free” service. Like any other business, that company has costs to cover. Rate hikes are fairly commonplace in the industry, as are hidden fees for things you thought were included, like document delivery.
On the other end of things, your business might justify a rate of $400 per year if you’re in a highly litigious or complex industry. But, for many entrepreneurs and small businesses, the rate isn’t worth it.
There’s no magic formula here but do your homework. The few extra minutes you spend upfront can mean selecting a vendor with a price, offering, and approach to doing business that is right for you.
Harbor Compliance does not provide tax, financial, or legal advice. Use of our services does not create an attorney-client relationship. Harbor Compliance is not acting as your attorney and does not review information you provide to us for legal accuracy or sufficiency.
