Written by Eamonn McElroy, CPA, Atlanta
Published October 31, 2022; Last updated January 29, 2024
One of the first questions that usually pop up when an individual forms their first business is “What is a registered agent, and what do they do?” Usually, the new business owner will list themselves as the registered agent for their business. For the address of the registered agent, the business owner usually lists a PO box or their home address. In this article, we explore why these common choices might not be best.
What is a registered agent?
A registered agent is a person or company that a business designates as having the authority to accept service of process and other important documents on behalf of the business. For example, if Bob forms a limited liability company (“LLC”) in Georgia, Bob must list a registered agent for the LLC at the time of formation, and each year thereafter when he files the annual registration for the LLC. If the LLC is ever sued, legal notice will be served to the registered agent on file with the Georgia Secretary of State.
Although there are variations by state, in general a business’s registered agent may be an owner, director or officer of the business, but isn’t required to be. Third-party individuals, such as an attorney, or a companies, such as a commercial registered agent, may be designated by a business as its registered agent. Generally, the only blanket requirement among states is that the registered agent must have a physical address within the state, and the registered agent must make themselves available at the listed address during “regular business hours“ Monday through Friday, excluding federal and state holidays.
Considerations when designating a registered agent and registered agent's address
Going back to our first paragraph above – why might it not be a good idea to list a PO box or an owner’s home address as the address of the registered agent? As previously mentioned, the primary purpose of a registered agent is to accept service of process on behalf of a business if that business is ever sued. And, the registered agent must make themselves available during regular business hours.
A PO box is not going to have a registered agent standing right next to it during regular business hours, unless the registered agent has a lot of time on their hands. Further, post office staff are not going to accept service of process or other important documents on your behalf. Due to these dynamics, a PO box fundamentally fails the primary purpose of a registered agent address.
Likewise, many small business owners are away from home during the workweek as they work a full or part-time job. If the owner isn’t consistently at home during regular business hours, the registered agent can’t be served and again has failed their responsibility to be physically present.
While additional effort may be made to track down the registered agent, it is important to note that the individual or entity bringing suit may not be legally required to do so, as it is the business’s responsibility to make sure their designated registered agent is available at the physical address they designate during regular business hours. If the registered agent is unable to be served because they’re not consistently physically present at the address they designate, the legal process may move forward without the business’s knowledge and default judgement may be obtained against the business.
Well worth the cost: commercial registered agents
Many savvy business owners hire a third-party company to act as registered agent for their business. For an annual fee, these “commercial registered agents” specialize in being the registered agent for your business. They maintain a physical office within the state that is staffed with an employee during regular business hours. This employee will accept service of process and other important documents on behalf of your business. Many commercial registered agents provide “same day scans” as part of their service. In other words, if a document is delivered to the commercial registered agent on behalf of your business, the employee will scan the pages to electronic copy, upload to a portal and send you a notification via email for viewing or download. Not only is this convenient, but it allows the maximum amount of time to take action in response to the document.
Fees are generally reasonable. Although cheaper isn’t always better, and due diligence should be done when selecting a commercial registered agent. For business owners with many companies, commercial registered agents often offer bulk discounts. For example, if Bob has 10 LLCs, he’d generally need to pay 10 annual fees to the commercial registered agent, however bulk discounts may be available as previously mentioned.
Another compelling factor is the discretion provided by a commercial registered agent. In the rare event that your business is sued, it is the registered agent that will be served. If the registered agent is a commercial registered agent and not you as the business owner, you will not be getting served in your place of business in front of clients or customers, or at the family and friends’ barbecue in your backyard. Instead, you will be discretely notified by the commercial registered agent either via email or call that they were served on behalf of your business. Vacations are no longer potential issues due to the fact that there is someone sitting at a desk during regular business hours on behalf of your business year-round. Your absence from your home or business no longer matter as you’ve effectively outsourced the responsibilities and risks of a registered agent to the third-party company.
Copyright © Eamonn McElroy CPA, LLC.
Disclaimer: Tax law, regulation and procedure are constantly changing. Eamonn McElroy CPA, LLC has provided this article as general information only and is under no obligation to update the article for future changes, including but not limited to changes in tax law or procedure. The information contained in the article is not tax, investment or legal advice, nor should it be construed as tax, investment or legal advice. You should consult with your advisors to determine how the information in this article affects you and what actions you may take and should take.