Whether you are starting a new business or reorganizing an existing one, it’s important to pick the right people in every role. There are no parts of the system that you can overlook simply because you think it’s not as fundamental to whatever your services or products are. A huge role that you need to take care of is a registered agent.
Considering the fact that 20% of small businesses in the US fail within the first year, you’ll want to cover all your bases if you want to succeed. A great registered agent will ensure that you have good business continuity and you’ll stay on top of regulations that can determine how smoothly you can operate in the long run. As the country goes full speed into Industry 4.0, there’s no time but the present to ensure that you are avoiding the most costly mistakes when looking for the right agent.
What is a Registered Agent?
A registered agent is responsible for receiving service of process on behalf of a business. This means that any legal documents and notices from other entities and the government will be directed to the agent. They are then tasked with informing relevant parties of these communications and ensuring timely responses to those sending them to the business.
A commercial registered agent will have their own designated address that can serve as the point of communication listed on the public record representing your business. This ensures swift compliance regardless of where you operate and also adds a layer of security and privacy for business owners. Although B2B and B2C businesses operate differently, they are both legally required by the state to have a registered agent.
All states require businesses to have one, but not all of them call the role a “registered agent”. For example, Kansas and Maryland label this role “resident agent.” In Ohio, this is called a “statutory agent”. Other states also have their own terminology, so it’s best to check with your Secretary of State before filing.
What to Avoid When Looking for a Registered Agent
1. Hiring Because You Know Them
A common mistake is to have a family member or friend become your registered agent. Not only does this complicate things in the event of a dispute, but it can also bar you from getting more experienced individuals who are familiar with all the responsibilities and liabilities that come with the role. Hiring someone you know is also not recommended because it removes that layer of privacy that happens to be one of the most useful benefits of having a registered agent.
A VMware study revealed that 59% of companies believe they gain market share with data-driven business decisions, and this same practice should apply to the hiring process. Active sourcing can do wonders in making your business process better and attracting reliable talent.
2. Registering Your Business as Its Own Agent
Some states allow business entities to serve as their own resident agent. For instance, you can file your business itself as your agent in Delaware. In some cases, you will only be allowed to do so if you meet certain requirements. Colorado lets your business serve as its own registered agent as long as it is staffed during business hours and has a physical address.
That said, it’s not recommended to go this route because it only adds more liability on your part. Having a dedicated agent ensures that you will stay on top of compliance requirements and lower your risk of inviting unwanted solicitation.
3. Getting an Agent From Another State
If you try to get an agent from another state, you would only be wasting your time. You could easily find the best registered agent in Alabama but they would only be able to legally represent your business if you operate in the same state. If you operate a multi-state business, you would need to make use of a registered agent service that has a presence in every state where you conduct your business.
Many places are also very strict with having the registered agent be a citizen of the state itself, so you save yourself a lot of headaches by simply looking at the local options. This is also more convenient in terms of communications and quick support.
4. Picking the Cheapest Option Without Research
You risk a lot of penalties when you miss out on official documentation and legal obligations, so you shouldn’t just get any registered agent without doing your research. After all, they are responsible for keeping you on top of these things despite the changing regulations being imposed on businesses constantly. This is especially important in highly regulated states like California, which is notorious for being quite unforgiving in its regulations for business owners.