Registered agent

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A registered agent is a business or individual designated to receive service of process (SOP) when a business entity is a party in a legal action such as a lawsuit or summons.

Contents

[edit] Registered agents

Most businesses in the United States are not individuals but instead business entities such as corporations or Limited Liability Companies (LLCs). This is because there are tremendous liability protections as well as tax advantages to being "incorporated" as opposed to being "self-employed".

Most jurisdictions in the United States require that any business entity that is formed retain and maintain a "Registered Agent". This is also known as the “Resident Agent” or "Statutory Agent" depending on the laws of the individual jurisdiction the business entity is registered in. The purpose of a Registered Agent is to provide a legal address (not a PO Box) where there are persons available during all normal business hours to facilitate legal service of process being served in the event of a legal action or lawsuit. Generally, the registered agent is also where the state government sends all official documents required each year for tax and legal purposes such as franchise tax notices and annual reports. Registered Agents generally will also notify business entities if their state government filing status is in "Good Standing" or not. The reason that these notifications are a desired function of a registered agent is that it is difficult for a business entity to keep track of legislative changes and report due dates for multiple jurisidictions given the disparate laws of different states.

Penalties for not maintaining a registered agent generally will cause a jurisdiction to revoke a business’s corporate or LLC legal status.

If a Registered Agent fails to perform their function, it can have dire consequences for the business entity. For example, if a customer fell inside a store and sued the store, and the store's registered agent failed to notify the business entity of a summons to appear in court to respond to the lawsuit, then when the case went to trial, nobody would appear to defend the store and the customer would win by a default judgment. Additionally, the store would likely not be able to get the judgment overturned on appeal because they had been properly served. This is why most businesses from "mom and pop" stores to major corporations generally will hire a legitimate commercial registered agent service company as their Registered Agent.

The person at the business entity that maintains contact with the registered agent is the corporate secretary or governance officer.

[edit] Third party registered agent attributes

  • An outside registered agent provides an anonymity shield, protecting a business from exposing its clients, vendors or neighbors to any legal proceedings.
  • An outside registered Agent puts a layer of privacy between the principals of a business and the public. For example, many businesses harvest “junk mail” lists from the databases of State offices. Having an actual registered agent greatly reduces the amount of “junk mail” businesses receive.
  • As the Registered Agent name and address is one of public record, Generally, the registered agent legal address will be the one listed in all official public documents.
  • An outside Registered Agent allows business entities to freely change their location at any time, without filing being required to file costly changes of address with the state they are registered in each time they move.
  • Commercial registered agents generally have systems to keep track of filing, notification and publishing requirements of business entities which can save businesses hundreds or even thousands of dollars in late penalties were they to miss a required government filing. These are referred to as "Compliance Managers", "Tax Calendars" and/or "Compliance Calendars".
  • Generally most commercial service providers have "Form Libraries" of forms and other documents required to file business entities in different jurisdictions - or to keep the business entity in compliance or "Good Standing".
  • Some commercial registered agents provide real-time notice of any litigation, and forward all official documents directly to the companies they represent.

[edit] Who can or does perform the function of a registered agent?

Most any person or business entity may legally act as a registered agent, however who actually should is another consideration. There are generally two choices between either a professional registered agent service company or an attorney. There are several commercial service companies that perform or contract Registered Agent services. Some service companies have been around for over 100 years since the dates when the first corporations were formed in the United States. In most all cases whether the business entity is small or extremely large, Registered Agent service is provided by commercial service companies. Almost every large corporation in existence is represented by one of four major registered agent companies. An exception to using a commercial service company is that registered agent service may also be provided by an attorney or even in some cases a CPA. In some states a business entity is legally allowed to act as its own registered agent, but even when allowed, this is widely not advised by the legal community and even law firms generally use commercial service companies.

[edit] Registered agent, resident agent, or statutory agent?

All three are correct. For years different states have used disparate names for registered agents, however most states have now changed their statutes to reflect "registered agent" and for the states that have not yet changed, there is proposed or pending legislation to enact this change.

[edit] Designating a registered agent

The registered agent for a business entity is generally assigned in the formation documents filed in a jurisdiction when the entity is originally created. For example, if you were forming a corporation in the State of Nevada (where note they refer to the registered agent as a "resident agent") or Delaware, you would designate the registered agent along with their address on the articles of incorporation that you file with the Nevada Secretary of State or Delaware Secretary of State respectively. If the agent can't physically sign the articles themselves, some states such as Nevada provide that you may assign the agent using a separate "Registered Agent Acceptance" form with the appropriate acceptance and signature. A representative of the business or the individual accepting responsibility as registered agent must sign to accept the responsibility of acting as agent. In most states it is a crime to knowingly file a false document with a Secretary of State office. Notably, in Nevada it is a Class "D" felony to forge this signature, but in other states such as Michigan, it is only a misdemeanor.

[edit] Jurisdiction filing fees to record a change of registered agent

Depending on the jurisdiction and type of entity, the agency (usually the Secretary of State of that jurisdiction) may charge a filing fee to record a change of agent, or it may be free. Oregon, Montana, Iowa, Idaho and Indiana do not charge anything to record a change of registered agent. Since it has a reputation as one of the best places to incorporate, it is surprising that Delaware has the highest change of agent filing fees of any state at $104 for a Corporation, $100 for a Limited-Liability Company and $200 for a Limited Partnership.[1]

[edit] Registered agent service fees

The fee for registered agent service is usually billed on an annual basis, often on the anniversary of the formation of the business entity and the cost varies widely. Attorneys are notoriously expensive registered agents since their billable time is generally charged at a relatively high rate. Legitimate commercial registered agent companies charge anywhere from $99 to $300 a year[2] [3], however virtually all companies historically give discounts to customers with large numbers of entities to register such as a supermarket chain which may have to have service for each store in various states. Such a discount can result in fees as low as $65 per unit of representation.

[edit] How to find who is the registered agent for any business entity

Most states have free internet access to their databases to find a business entity's registered agent. Three states charge to get this information online (Indiana, Minnesota and New Jersey). Of these three states, two offer the information for free by phone. Minnesota is the only state that charges to retrieve this information online where it was previously offered for free. You can however still call the Minnesota Secretary of State and get this information over the phone. New Jersey charges a fee to provide registered agent information unless you appear at their office in person.[4]

[edit] The "big four" registered agent service companies

Just as with accounting firms, there are literally thousands of registered agents, but just as in accounting firms there is a recognized "Big Four" registered agent service companies. Virtually all of the Fortune 1000 are represented by these four companies and nearly all of the NLJ 250 law offices utilize one of these four companies for their clients. These are the top four companies by volume according to statistics compiled from the various databases of the Secretary of State offices that provide them. These companies are so common in the legal world that their initials alone are relatively standard legal nomenclature.

The four companies are virulently competitive. It is rumored that when a new employee is hired by the Corporation Service Company, they are given a golden spike to "drive through the heart of CT".

As with any industry, because these are the four largest companies does not necessarily mean that they are any better or worse than any of the many other hundreds of smaller service companies. Smaller companies might have more personalized service for instance or be less expensive. Most if not all of the smaller companies do not have their own offices in various states, but instead tend to resell the services of the big four through affiliate arrangements. An advantage of the big four companies would be with their obvious capital advantage, since that would give them more financial and other resources to develop new corporate governance and compliance technology as well as applications for their clients.

Attorneys, paralegals and accountants will generally refer to the service companies by their initials. In a law office you might hear them refer to "sending something off to CT". It is interesting to note the ages of some of these companies (some over 100 years old). No matter what large company you can think of in virtually any industry, or how far back in time you go whether it is GE, IBM, Pfizer, or Ford, it almost certain that it was formed or is represented - by one of the companies above.

[edit] Model registered agents act

The Model Registered Agents Act is an effort spearheaded by the American Bar Association and the International Association of Commercial Administrators to standardize business entity laws as they relate to annual reports, registered agents and other laws and forms used to file business entities. The problem this effort seeks to alleviate is the fact that disparate laws, filing requirements and forms in all of the US jurisdictions where business entities are filed creates a quagmire for any company seeking to register to do business in those jurisdictions. By adopting a common set of laws, rules and forms - as well as an XML standard for electronic filing, the Model Registered Agents Act seeks to vastly simplify the process of filing and maintaining a business entity in any jurisdiction adopting it.[5]

The Nevada Resident Agent Association working with the Big Four and regional agents have been working to implement the Model Registered Agents Act as well as enact a regulatory board in Nevada.[6] On March 8, 2007, the draft of Senate Bill SB242 was introduced. This is notable in that if successful in Nevada, it is speculated that this could be a catalyst to copy that model and implement the act in other states.

A primary factor in motivating the industry to regulation and adoption of the act is that in November 2006, The United States Department of the Treasury Financial Crimes Enforcement Network (FinCEN) released a report scrutinizing the registered agent and incorporating industry's albiet unknowing facilitation of financial crimes (money laundering, tax evasion, terror funding, fraud, etc.)[1] and recommended that stricter controls and monitoring be imposed on business entities. These recommendations were a component of current federal anti-terror legislation that is being considered, however these provisions were removed after protest from various Secretary of State offices and to give the industry an opportunity to enact its own regulation.


[edit] External Links

[edit] Resources/References/Research

[edit] Official state government listings of entities that may be willing to act as registered agents/resident agents by state

[edit] References

  1. ^ http://www.e-secretaryofstate.com e-SecretaryofState.com
  2. ^ http://www.nevada-resident-agents.com Nevada-Resident-Agents.com
  3. ^ http://www.registered-agent-listings.com Registered-Agent-Listings.com
  4. ^ http://www.residentagentinfo.com ResidentAgentInfo.com
  5. ^ http://www.iaca.org International Association of Commercial Administrators (IACA)
  6. ^ http://www.nraa.biz Nevada Resident Agent Association
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