Americans filed paperwork to start around 4.3 million businesses last year, according to data from the Census Bureau. This indicates a 24% increase from the year before and applications are expected to remain at a high pace this year as well.
The surge is unexpected after a nearly 40-year decline in U.S entrepreneurship. The entrepreneurial boom has proved broader and more durable than some skeptics expected, with many of the biggest gains being witnessed in the retailing, food service, and logistics sectors. The share of workers reporting they were self-employed hit an 8-year high in July, with many businesses along with their respective registered agents finding their feet.
What is a registered agent?
A registered agent is a company or individual who receives service of progress, legal documents, and official notices on the business’s behalf. When registering a business entity one will be required to appoint a resided agent who has a physical address in the state of registration. There are certain requirements registered agents must meet. In general, these requirements are:
- If the agent is an individual, they must be 18 years or older.
- If the agent is an individual they must be a resident of the state of registration. If the registered agent is a company it has to be authorized to do business in the state.
- Registered agents (whether an individual or company) must have a physical address in the state of registration. This location is usually referred to as the “registered office.” Bear in mind that P.O boxes don’t count as a physical address.
- The registered agent must be available to receive mail and sign official documents during normal business hours, Monday to Friday. Normal business hours are considered to be from 09:00 AM to 17:00 PM.
Different states have different regulations. In Virginia only licensed attorneys or officers or members of the business can serve as registered agents. In some states, the registered agent must submit a consent form indicating that they have agreed to be the company’s registered agent.
Why is a registered agent necessary?
The main purpose of a registered agent is to ensure that there is a reliable way for the public, courts, and the government to contact the business entity. More specifically there are three additional (and equally important) reasons registered agents are needed. Apart from receiving legal processes and providing a reliable way for the government to contact the business entity, registered agents help businesses stay in compliance. Typically a registered agent will make use of a compliance calendar, notifying the business in a timely manner of any important filings and looming deadlines. Most businesses hire a legal service or attorney to serve as a registered agent.
What happens if a business does not maintain a registered agent as it should?
Penalties come into play if a business does not maintain a registered agent as per state requirements. Sometimes the penalties can be severe, in some states the business entity could be administratively dissolved if a registered agent is not maintained. The state may consider the filing to be incomplete and won’t allow incorporation of the business if a registered agent is not designated.
In a similar vein, business owners can be completely blindsided if the process is served on a business and there is no registered agent appointed. Businesses without a registered agent may lose their good standing in the state. Businesses out of compliance could, in theory, lose their corporate veil opening up the personal assets of owners to lawsuits. Keeping an agent listed for a business is a fairly simple and straightforward process.
Should you be your own registered agent?
The convenience of serving as your own registered agent shouldn’t overshadow some of the drawbacks this choice presents. The address of the registered agent is publicly available. So if an entrepreneur operates a business out of his home and chooses to act as his own registered agent, his/her home address will be the registered agent address, making it a part of public record. The law also generally requires that the registered agent should be available during regular business hours. This option may not be convenient for most entrepreneurs, which is why most businesses maintain a registered agent.