Choosing a Resident Agent for your LLC

A resident agent can also be called a statutory agent or a registered agent. A resident agent is your LLC’s legal face in each state where your business structure is formed or registered. Largely the primary purpose of a resident agent is to accept service of legal documents on behalf of your LLC. That’s why resident agents are required in almost every state: without a resident agent, your business doesn’t have proper legal standing to operate in that state.

The primary purpose of a resident agent is to accept service of legal documents on behalf of the business structure, essentially becoming your legal face.

There are two exceptions: New York and West Virginia, but even in these two states you are still required to designate an address (in this case the attorney general’s office) as your resident agent and authorize that office to accept service on behalf of your LLC.

There are resident agent companies available in every state. You can expect to pay a yearly fee for this service. Resident agents may also offer additional services, such as providing you with a mailing address in a state and forwarding mail to you. Your resident agent should also make sure that any annual state filings are done on behalf of your LLC, and may also offer an annual minutes service.

A Caution on Acting as Your Own Resident Agent

If the most likely source of a lawsuit against your rental property is from your tenant, then isn’t using your rental property address as your resident agent address kind of like asking a fox to guard your henhouse?

You can also act as your LLC’s resident agent, if you live in the same state. Remember though, that a resident agent accepts service of legal documents. That means you need to be available during regular business hours. So, if you are a frequent traveler that may hinder your duties of being your own resident agent. Once you are served with a legal document, you have a set period of time in which to file a reply, or you risk losing the argument by default, simply because you didn’t file a response on time.

Also remember that the resident agent address is public record. If you have an outside office you can use that address, but if you don’t – if you work at home, for example – you must put your home address out there. That takes away your privacy, and means people could be showing up at your door, including those who are trying to sue you. Making yourself available in this manner isn’t necessarily in your best interest.

We’ve also heard stories about LLC owners with real estate, who used a rental property address as the resident agent address. In most cases it turned out to be a very bad idea. The owners were trusting that a tenant would accept service of the documents and forward those documents to them in good time. It rarely worked out that way, particularly in the cases where it was the tenant who was bringing the lawsuit.

We’ve also heard stories of people acting as personal resident agents who live in gated, or restricted access communities. This can be problematic as well. A litigant who is unable to access the address to serve documents can apply to a Court for an order bypassing personal service, on the grounds that you are attempting to evade service.

What to Look for in a Resident Agent

When you are looking for a resident agent company, look for a company that has been in business for some time, and that has a good reputation. You certainly don’t need to find out later that your resident agent has closed up shop and disappeared. If that happens you could find that your LLC has been revoked by the state because you didn’t have a valid resident agent – even if you were never informed of your agent’s disappearance!

You should expect to hear from your resident agent at least once per year, as most states have an annual filing requirement for all business structures. Even if your LLC isn’t required to file an annual report (quite common in many states), your agent will still contact you to renew their service for another year. If you already have a business entity and haven’t heard from your resident agent recently, you may want to look through your records and contact them to make sure that everything is in order. If you’ve moved your agent may not have been able to contact you, and may have resigned as your agent for that reason. Resident agents do not need permission to resign and are not required to contact you beforehand.

Resident agent competition is fierce. Don’t get caught up in monthly service fees, and don’t be afraid to comparison shop. You can often get good service for $99 per year, or less. If you have multiple LLCs, you can often negotiate a discount.

There are many variables when you’re structuring a business. That’s why it’s hard to go through a quick-service website. Unless you talk to someone who’s got some knowledge and experience on both the tax and the legal side, it’s hard to know what you don’t know. And that can leave you vulnerable.

Got questions? Contact us! We’re here for you.

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