If you're looking for ways to expand your revenue streams, you may be considering offering statutory agent services. What do statutory agents (also known as "registered agents") do and what’s required to become one? This article will discuss how these service providers help businesses and who can be a statutory agent.
A statutory agent is an individual or entity that a limited liability company, S corporation, C corporation or other legal business entity appoints to receive legal notifications (service of process), government correspondence, and business compliance paperwork on its behalf.
Examples of the types of documentation statutory agents accept for their clients include:
- Court summonses;
- Notice of lawsuits;
- Corporate filing notifications (such as annual reports);
- Tax notices;
- Official state and federal government correspondence;
- Information subpoenas; and,
- Wage garnishment notices.
All states require business entities (
Companies must maintain a registered agent at all times to ensure compliance with state laws. Registered agent service providers typically offer one-year or multiyear contracts. It’s vital for business owners to renew their contract with their current provider or subscribe with a different registered agent when their existing contract expires.
Failure to maintain a registered agent can lead to fines and penalties, including loss of the business’ status of good standing with the state. Falling out of good standing can be detrimental to business owners as they risk losing the personal liability protection that their registered business structure provides.
What does it take to be a statutory agent?
The rules may vary slightly by state. Therefore, it’s important to review the specific requirements for the states where you’re interested in providing registered agent services.
Generally speaking, a statutory agent must meet the following criteria to be recognized as a legitimate provider:
- Have a physical address (a “registered office”) in the state where they are providing registered agent services to businesses (the address must be a street address, not a P.O. box or mail service);
- Maintain office hours from 8 a.m. to 5 p.m. from Monday to Friday; and,
- Be an individual at least 18 years of age who is a resident of the state or an official business entity (e.g., LLC or corporation) that meets all qualification requirements and is certified with the state to serve as a registered agent.
An LLC or corporation may not be its own statutory agent. However, it can hire a third-party company (a commercial registered office provider) to serve as its registered agent. Alternatively, it can designate its owner or another individual in the business (e.g., an employee, director or officer) to serve as a statutory agent. The in-house registered agent route has some potential downsides as individuals may find it challenging to be available from 8 to 5 every day of the week. Plus, there could be privacy and other concerns when business owners or employees serve as their company’s registered agent.
Benefits of a third party
It’s typically advantageous for a business to contract a third-party registered agent rather than appointing the company’s owner, worker or other stakeholder to take on the responsibility.
Aside from the business compliance advantages of designating a commercial statutory agent, entrepreneurs also benefit from some privacy protection. With a third-party registered agent, that agent’s address is published publicly rather than the business owner’s home address.
A commercial registered agent offers the benefit of discretion, too. When a statutory agent receives sensitive notices for a company, it spares the business owners the embarrassment of getting lawsuit notices or court summonses delivered in front of customers.
A nationally recognized statutory agent makes it simpler for a business to expand into additional states. Rather than needing to form relationships with a different registered agent in each state, the company only has to coordinate with one point of contact no matter where it moves or expands.
Steps to become a registered agent
The process to expand an existing accounting or tax advisory business to include statutory agent services depends on the state. Typically, the general steps for an individual or company to become an authorized registered agent are:
- Meet the state’s criteria (e.g., physical address, availability during business hours, residency or foreign qualification in the state, etc.).
- If operating as a sole proprietorship or general partnership, form a legal business entity according to the state’s rules. This also provides personal liability protection for the business owner.
- Follow the state’s process for becoming certified as a registered agent in its jurisdiction.
- Provide the name and address of your statutory agent business to clients who enroll in your services and instruct them to list that information on their formation or other filings that require registered agent information.
Professional services providers like you can make exceptional statutory agents. However, branching out into registered agent services isn’t an ideal fit for everyone.
Consider asking for insight and advice from other professionals who offer registered agent services. They may have some excellent food for thought about best practices to adopt and pitfalls to avoid. Speaking with an attorney for guidance, especially if forming or changing your business structure, can also help ensure you take the right steps and cover all the bases.
