If you’re considering being a registered agent for yourself or someone else, good for you. Registered agents are essential to the function of a business, and if you’re an organized person, I’m sure you’ll thrive in the position.
Still, you should know it’s not without its risks. Serving as a registered agent is a serious job, and if you screw it up, you could face equally serious consequences.
There are a number of risks associated with being a registered agent, and I’ll tell you all about them in this article.
Registered Agent Risks
An untrained “civilian” taking on the role of a registered agent is called an “individual registered agent.” This is in contrast to a professional registered agent service, which is usually a corporation of some kind that charges a fee for consistent registered agent services.
A registered agent can get into a lot of trouble simply for entering a listed address incorrectly, failing to report address changes in a timely manner, or accidentally missing a service of process.
You may have already guessed, but it’s riskier to be an individual registered agent than just another cog in a professional registered agent machine.
Here are some of the risks of being an individual registered agent.
Failing to be Present at the Registered Agent Address
A registered agent who isn’t trained and working with a team of agents could run the risk of not being physically present at the registered agent address during regular business hours.
Maybe their kids got sick, or something seemingly important came up and they left their post for several hours. Or maybe they took the day off thinking everyone deserves one now and then.
But if a registered agent isn’t physically present at the physical location listed as the business’s registered agent address during normal business hours, the service of process could be sent to the Secretary of State. Or it could be accepted by someone else who’s actually there at your registered address during business hours (like a secretary or another employee).
So long as the other person does their due diligence and provides the business owner with the service of process right away, this shouldn’t be a problem. But if the person who accepted service doesn’t inform the business owner about process notices, then the company could have a nasty default judgment issued against it.
The same goes for if the Secretary of State receives legal notices for your registered agent. And, not insignificantly, the state government could issue penalties against the business for failing to properly maintain a registered agent.
This is bad news if you’re serving as your own agent. It’s even worse if you’re serving as someone else’s agent. The business owner you failed to protect could sue you as a result. If you’ve never been sued before, let me tell you — it’s not fun.
Failing to Issue Address Change Notices
A business’s registered agent address is a big deal for several reasons.
It’s where the business receives legal notices and official documents, as well as notifications about annual reports to stay compliant, so it’s important that the registered agent address is kept up to date with the state government.
If a registered agent changes their address but doesn’t update it with the Secretary of State, both the business owner and your registered agent could face legal action, not the least because service of process and other sensitive documents won’t be delivered and accepted in a timely manner.
Mishandling or Ignoring Important Documents
If a registered agent isn’t trained on the proper protocol to receive service of process and doesn’t know how important it is, then they could easily mess it up just by not knowing what to do.
If an agent doesn’t receive legal documents for a business, or doesn’t handle them properly, it could spell disaster for the whole company. Tax documents, legal notices, compliance information, and more are sent to a business’s registered agent address, so it’s important that every registered agent handles it all with care.
What Are the Duties of a Registered Agent?
It’s important to know about the duties of a registered agent, whether you’re going to be your own individual agent or someone else’s. That way you can go into it knowing what to expect of the job before you face the accompanying risks.
Providing an Address
First and foremost, a registered agent is an address. If you’re going to be your own agent, or someone else’s, you’ve got to have a reliable, physical address where serious legal correspondence can be delivered. You can’t use a PO box, and you’ve gotta be comfortable with the address being public.
Compliance
Unfortunately, compliance deadlines typically only come once a year on the anniversary of the legal establishment of a business, which can make them difficult to remember. The registered agent intercepts information notifying the company about upcoming compliance filing deadlines, which makes it their job to pass the information along.
If a business misses a compliance filing deadline, it could lose its good-standing status, which would result in the company’s failure to qualify for business loans, no longer being allowed to expand to other states, and no longer being permitted to conduct business in the state.
Management of Important Documents
All of a company’s official correspondence from government agencies, as well as legal and tax notices are sent to the listed registered agent address. Typically, registered agents get this information to their clients using either mail forwarding or an online document-management system.
In fact, many of the leading registered agent services now use online document-management systems because they not only allow clients to view important correspondence faster than mail forwarding through snail mail allows, but also provides them with a nifty online storage option for all of their documents.
But with an individual registered agent, an online document-management system is unlikely, and so is the convenience and safety that comes with it. There’s a lot of opportunity for accidentally losing something or forgetting about it with this method, which is one of the risks of being a registered agent.
Service of Process
Registered agents and service of process go together like peanut butter and jelly, but the majority of information about registered agents on the internet would have you believe that every business will receive service of process daily.
We certainly hope you don’t receive documentation and notices that your business is being sued on a regular basis! But in the event that a company is sued, or the business owner’s presence is requested in court, it’s the registered agent’s job to accept service of process on behalf of the business. And it’s an important job that carries a lot of liabilities, too.
Pros and Cons of Being Your Own Registered Agent
You’re legally allowed to be your own registered agent in most places, and many business owners choose to. But before you make that decision for yourself, you should learn about the benefits and drawbacks of being your own agent. There are many risks that aren’t obvious to the average business owner.
Cons of Being Your Own Registered Agent
Liability
Limited liability companies come with liability and asset protection, keeping your personal assets and finances separate from those of the company. But as your own agent, if you make one little misstep, this protection is at risk.
And the more work you have to do, the bigger the business you own, the more likely you are to fumble your registered agent duties. But even small business owners could have a bad day and screw up, which could result in costly financial losses for the company in court.
Of course, there are significant financial and legal consequences for other business entities, such as corporations, sole proprietorships, and limited liability partnerships, as well, if registered agent duties are performed properly.
Lack of Privacy
One alarming risk of being your own agent is that your personal information will be listed on the public record as the registered agent for your business. If your business location or site of business operations doesn’t have a physical or office address you can use, then your home address will be listed, along with your name and phone number.
Once it’s uploaded to the public record, hackers and cybercriminals can use your information as they please, stealing your identity and running up debt in your name so alarmingly fast that by the time you’ve realized it’s happened, it’s too late.
But possibly the most unnerving aspect of this is that everyone has access to your personal address and phone number. You wouldn’t walk around passing out your phone number and address to every person you meet on the street, would you? That’s what having your information listed on the public record is like, only on a larger scale.
Time
Many business owners don’t realize how time consuming being a registered agent is. Because you’re required to be physically present at your registered agent address during normal business hours, it’s a full-time, 9–5 job. Which means that as both a business owner and a registered agent, you’ll be working two jobs.
The major conflict comes when you realize that your business is also probably operating during regular business hours, and you can’t adequately perform your duties as registered agent and manage your business simultaneously and be in two places at once.
Pros of Being Your Own Registered Agent
The sole benefit of being your own registered agent is that you won’t have to pay fees for registered agent services. But once they find out about the risks and drawbacks of being a registered agent, many business owners are in agreement that hiring a registered agent is worth the expense.
How to Avoid These Risks
Many of the risks of being a registered agent are limited to being an individual registered agent since there’s typically only one person doing the job all by themselves. And while it’s legal for you to be your own registered agent or someone else’s, it’s hard to ignore these alarming risks.
In contrast, hiring a registered agent service means that an entire firm full of registered agents will carry out registered agent duties for your business, so it’s a lot less likely that a service of process will slip by them all.
Many states require any registered agent or statutory agent service with more than 50 clients to register itself as a commercial registered agent. There are two things to take away from that: the business’s reputation is good enough to attract more than fifty clients, and the state regulates their service more than they would an individual or a smaller registered agent service.
An individual registered agent is still held liable if they’re negligent in their duties, but the government doesn’t regulate them. If you’d like to avoid the risks of being a registered agent almost entirely, then you should consider hiring a registered agent — preferably a commercial registered agent.
If you’d like to learn more about registered agent services, or how to find the right service provider for your company, read my comprehensive guide on the Best Registered Agent Services.
Conclusion
There are several serious risks involved with being a registered agent. Missing a service of process or failing to report an address change could result in missing important correspondence or confidential paperwork, as well as penalties from the state government against the business.
Of course, if you’ve got plenty of time and excellent organizational skills, it’s up to you to take it on. And if you do, good luck!
If you’re planning to establish a business and would like to learn more about the wonderful world of LLC formation, then check out How to Start an LLC.
And if you’d benefit from a trained professional to help you through the complicated paperwork and red tape of the formation process, then read the Best LLC Formation Services.
