Can You Be the Registered Agent When You Form an LLC?
According to NOLO, “a limited liability company, commonly called an ‘LLC,’ is a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.” In this article we’ll discuss how to register your small business as an LLC, what an LLC Registered Agent is, how to become a registered agent for an LLC, and the benefits and drawbacks of being your own LLC’s registered agent.
The advantages of registering your small business as an LLC are that it reduces personal liability and can provide you and your employees with a number of tax deductions. Since the highest percentage of tax audits are done on people who file a Schedule C—that is, who are claiming self-employment income and deductions—an LLC can protect you from that complication as well.
Forming an LLC isn’t as difficult as many people think. There are five basic steps:
- Select a name for your business that no one has used before.
- File articles of organization and pay the filing fee.
- Create an operating agreement that says how the business will be run.
- Publish a notice of your intent to form the LLC.
- Get the licenses and permits your business needs to run.
You also need to designate a registered agent for the LLC. Let’s take a look at what an LLC’s registered agent does and whether or not you, as the owner of the business, can (or should) be the registered agent for your own business.
Why Do I Need a Registered Agent For My LLC?
When you’re a sole proprietor, there’s no distinction between you and the business and also no legal separation between personal and business assets. One of the main reasons to form an LLC is to create a boundary that separates the two realms and protects your personal assets.
The registered agent plays an important role in maintaining this boundary of separation. This reliable third-party maintains a physical address in the state where you formed the LLC and is authorized to receive all the important and often time-sensitive documents that come to your business, including service process notifications, tax forms, and legal documents. This means that you won’t miss deadlines should you go on vacation or otherwise be absent. An LLC’s registered agent will also maintain an accurate record of all the information relevant to your business’s operation so that you can concentrate on running and growing your company.
Most states require LLC’s to have a registered agent, but even if your state doesn’t, it’s still a good idea. Not having a registered agent can affect your organization because it’s quite time consuming to keep track of legislative changes, franchise tax notices, annual reports, etc. And if you mess up, the penalties may be the revocation of your LLC’s license and fines.
Can I Be My Own Registered Agent?
There is no law preventing you from being your LLC’s registered agent. If you conduct business in the same state where you set up the LLC and work during regular business hours at the address on record, you could do it. However, it is not advisable. Here’s why:
- You might not be there when an important document comes in. Say you are running a family inn. Most of the time you are on the property, overseeing the business end and greeting all the guests, but what if a legal document arrives while you are running errands in town? What if you’re on vacation and end up missing the deadline on a time-sensitive legal document? A third-party agent’s job is to be there (at their office, not your inn) every day for this reason.
- You won’t be embarrassed if you’re served legal documents in front of your clients. A registered agent saves you the humiliation of looking like a deadbeat in front of clients and employees and can help to preserve the reputation of your business.
- You won’t lose a lawsuit by default. You can lose everything on a technicality if legal paperwork isn’t served properly. Having a registered agent is your first and best line of defense against having that happen.
- You might want to operate your business in more than one state. You need to have a registered agent in each state where your business operates. Once you decide to expand your operation, having third-party agents who know the ins and outs of other jurisdictions will save you many headaches!
- You might want to change your address. Every time you move your business’ location, you’ll need to file with the state and pay any necessary fees to make the change official so that your address remains a matter of public record.
- You hate receiving junk mail. The registered agent’s address must be in the public record, meaning that every advertiser and company can add you to their list. Having a third-party agent frees you from the inevitable onslaught of special offers and services. As an individual, you are free to block those pesky offers by having a private address.
- You don’t work regular business hours. If you serve as your own registered agent, you need to be in the office when the mail carrier and courier services make their rounds. That alone can place a significant burden on you. Not only will you never be able to take off a few days, but you won’t even be able to take the morning or afternoon off.
Hiring a third-party registered agent for an LLC facilitates the smooth operation of your business and allows you the peace of mind of knowing that a reliable person is always there to receive your documents. A reliable registered agent also helps to maintain your LLC’s reputation and credibility. Most importantly, though, they give you the freedom to run your business on the go.
Now that you have a better idea of what a registered agent for an LLC is, and what they can do for your business, you can expand your business with confidence. For more small business advice from the best icebreaker questions for interviews, to the challenges facing today’s entrepreneurs, check out our blog!