What Is a Registered Agent?
Every formal entity, such as corporations, S corporations, and limited liability companies (LLC), must have an agent located within its state of formation and in every state where it is registered to do business. Unlike a common-law agent of corporation, such as officers or managers, a registered agent’s scope of authority on behalf of the corporation is very limited. A registered agent’s primary function is to receive Service of Process and other government and legal notifications and documents on behalf of the entity and deliver those documents to the correct parties within the entity. Although the functions are limited, they are extremely important and if they are not handled properly, there can be severe consequences for the entity.
CT Tip: This agent is referred to as a “registered agent” in most states. However, some states use the term “resident agent,” which serves to emphasize that the agent must be a resident of the state. “Statutory agent” is another term that may be used, highlighting the fact that an entity is required by statute to appoint and maintain an agent for service of process.
What Is Service of Process?
Strictly speaking, service of process is the process by which a court obtains jurisdiction over the defendant in a lawsuit. Usually, this involves serving the defendant with a summons. By serving process on the registered agent, the court obtains jurisdiction over the corporation or LLC.
CT Tip: Not having a registered agent does not mean that the company cannot be sued. What it does mean is that the court can obtain jurisdiction in another manner, but the company will not have timely notice of the lawsuit and will not be able to mount a defense.
In addition to receiving Service of Process in connection with a lawsuit, the registered agent receives other mission-critical documents, such as:
- litigation documents, including motions or requests to produce documents
- legal notices
- government correspondence, such as notices of annual report deadlines and tax notification
- other compliance-related documents
Each type of document has one common element. Each one contains information that it is essential that the entity know and act upon in a timely manner.
What Happens If You Don’t Designate A Registered Agent?
Designating a registered agent is one part of the formation process. You must designate a registered agent on your initial formation papers (Articles of Incorporation or Articles of Formation) or the home state will not process the application. A similar rule applies when you register to do business in another state by obtaining a Certificate of Registration.
However, it is not enough to have a registered agent at the time of formation. You must maintain a registered agent in your home state and every state where you have registered to do business. Many states require that the current registered agent be listed on the entity’s annual report. All states expect the entity to file a change of registered agent form whenever the agent changes.
If you don’t maintain Registered Agent, your company is at risk.
First, your company is at risk because you will not receive critical information that you need. For example, if your company is sued and there is no registered agent to receive the summons, the plaintiff can proceed with the lawsuit—without you. A default judgment can be entered against your company (even if the lawsuit was frivolous and you could easily have won the case). By the time the judgment is enforced against your assets, it may be too late to undo the damage.
Second, your company risks its “good standing” it the state. Losing good standing can prevent you from bringing a lawsuit in the state, expanding into other states, or obtaining financing that you need to expand your business.
Third, your entity (and you personally) may be hit with fines and penalties for non-compliance. This can be a Catch-22 because without a registered agent, you may be unaware of the situation which can cause the amounts and sanctions to continue to increase.
Finally, the state can step in an administratively dissolve your entity. This means that you forfeit the limited liability protection that your entity provided and leave you exposed to business creditors. It most cases, administrative dissolution can be remedied—but not in every case and not after too much time has elapsed.
Why Should You Choose A Professional Registered Agent?
The minimum qualification to serve as a registered agent is pretty simple: The registered agent must be a resident of the state. For entities that are formed in the state of residence of one of the board members or officers, the temptation is 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.
CT Tip: When you expand into a new state, a professional registered agent service is a necessity due to the requirement that the registered agent be a resident of the state. CT Corporation has over 100 years of experience in providing reliable Registered Agent services with offices in all 51 jurisdictions.
It is often a better strategy to choose a professional Registered Agent service. Why? Because it is essential that the registered agent always be ready, willing and able to perform two critical functions mentioned earlier:
- Receive mission-critical documents from the state and
- Relay these documents to the appropriate party quickly and effectively.
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 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 your customers (and if operating a home-based business, in front of your family, friends and neighbors) can be uncomfortable to say the least.
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 default judgment. Receiving 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 service 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 monitor and responds to changes in the law.