Risks of Being Your Own Registered Agent (Legal Duties)
A registered agent is a requirement for every business that wishes to operate in any state. However, being a registered agent comes with its risks.
A 2023 Harvard Business Review study of over 10,000 small businesses showed that using registered agent services led to a 25% reduction in legal issues compared to self-represented businesses.
Most people get into the career of being a registered agent without weighing the pros and cons of it or considering the potential risks that come with that position.
As someone who worked as a registered agent for five years, I will reveal all the risks of being a registered agent below and help you understand this occupation better.
Quick Summary
- One major risk of being a registered agent is that you can damage the reputation of your business if you fail to receive service of process notices when due.
- You must be available at your registered office during regular business hours 5 days per week.
- A 2023 Harvard Business Review study of over 10,000 small businesses showed that using registered agent services led to a 25% reduction in legal issues compared to self-represented businesses.
- Whenever my clients want to cut costs, I tell them that they can act as their own registered agents if they meet all of the state's requirements.
What Are The Risks Of Being A Registered Agent?
The risks of being a registered agent include the following:
1. You Must Be Available At Your Physical Office During Normal Business Hours
To be a registered agent, commitment is key, requiring constant availability at your office during standard business hours, such as 9 a.m. to 5 p.m., without breaks or personal errands.
This ensures you're always there to receive legal notices, preventing missed lawsuit notifications against the company you represent [1].
From my experience, not being in your workplace during business hours could also lead to you losing clients or causing problems for their business, which needs to be avoided at all costs.
A U.S. Small Business Administration survey indicates that about 50% of small businesses are open during standard hours (Monday-Friday, 9 am to 5 pm), posing challenges for owners working different hours and risking missed legal notices from their registered agent service.
2. You Must Not Miss A Document Delivery
Registered agents are required to be present during business hours to accept documents, without the option to reschedule or delegate receipt.
From experience, if you are not available at the designated contact location, it's considered a missed delivery, which can lead to legal issues for the represented company and damage trust with clients.
"The decision to be your own registered agent should not be taken lightly. It involves more than just accepting mail; it's about ensuring that your business responds effectively to legal actions and remains in good standing."
- Jon Morgan, CEO & Editor-in-Chief of Venture Smarter
3. Your Address Becomes Public Information
Being a registered agent may challenge your privacy preferences, as you're required to disclose your physical address for legal notice deliveries by the government, individuals, and organizations [2].
Using your home address as a registered agent can compromise your privacy significantly, as it becomes a public point for legal notices, potentially invading your personal space.
I recommend renting an office space to maintain privacy and professionalism, offering a clear separation between work and personal life.
4. You Are Limited To Your State
Becoming a registered agent means you are tied down to the state where your physical address and the company you are representing are.
This means you won't be able to conduct business anywhere else other than your state.
If you wish to conduct business anywhere else, you would have to cease to be the registered agent of the company you are representing in that state and, if possible, assist the company in getting another one.
5. You Will Need To Sift Through Unwanted Information
From my experience as a registered agent, I often deal with a significant amount of junk mail, necessitating careful sorting to identify crucial documents for the companies you represent.
This task is time-consuming and demands high attention to detail.
What Are The Requirements For A Registered Agent?
The requirements for becoming a registered agent are straightforward and include the following:
- The registered agent has to be a resident of the state where the LLC is located.
- The registered agent must either possess a personal or business address where legal correspondence may be carried out.
- The registered agent must be of legal age and in good standing with the state.
- The registered agent must comply with business laws, regulations, and requirements as mandated by the state.
- The registered agent must be able to conduct service of process during official business hours.
Depending on the state, there may be additional requirements for becoming a registered agent, so before starting your business, I recommend consulting the Secretary of State to ensure you stay compliant with the law.
Can You Become Your Own Registered Agent?
You can become your own LLC registered agent as long as you can satisfy the general requirements of the role.
Also, check your state to see if you can become your own registered agent, as some states do not permit a business owner to become their registered agent.
From my experience, I recommend a third party to be your agent as they are better placed to handle the roles and responsibilities of the position.
Related articles:
- What Is a Non-Commercial Registered Agent
- What Is a Registered Agent for a Non-Profit
- Do I Need a Registered Agent in Every State
FAQs
What Does It Mean To Register With An Agent?
To register with an agent means that your company has to get a registered agent that will act on its behalf in receiving legal notices and other documents from the government and other individuals and organizations.
Does Every Business Entity Need A Registered Agent?
No, not every business entity needs a registered agent. Sole proprietorships and general partnerships are the only business entities that do not require a registered agent.
Can A Registered Agent Have A Virtual Address?
No, a registered agent cannot have a virtual address. Instead, they must have a physical address for receiving documents during normal business hours.
References:
- https://www.linkedin.com/pulse/hidden-risks-being-registered-agent-kathleen-mcnaughton-bory/
- https://www.sos.wa.gov/corporations-charities/frequently-asked-questions-faqs/faq-registered-agent
