Starting a business may be an exciting process, but it’s also filled with administrative challenges. Navigating bureaucracy, filling in all the paperwork, keeping track of government notices, all these things take time, energy, and money. And when your primary duty is to streamline processes and think of smart strategies to enter the market with a bang, paperwork can fall into second place.
Most new business owners want to cut costs wherever they can in the beginning when funds are short. More often than not, the new entrepreneur is a jack of all trades who takes up as many jobs as possible: the manager, the accountant, the marketer, the sales agent, and the registered agent. However, by trying to do all these things at the same time, you’ll end up achieving less. This desire to overachieve can be quite dangerous, and the job of a registered agent, in particular, should best be left to a professional.
Technically, you can act as your own registered agent to save money, but that’s rarely the best option, and it can actually end up costing you more than you save.
But what does a registered agent do, exactly?
What is a registered agent?
By law, every business must have a registered agent. In simple terms, a registered agent is a legal appointee who receives government notices such as lawsuit notifications and other important documents and sends them to you in a timely manner so that you stay compliant and on top of your paperwork. A registered agent also provides a physical address where all these documents should be sent – and that’s one of the biggest perks because you can keep your personal address private, and you don’t have to worry about missing any important notices while you’re away.
However, it’s important to establish what a registered agent is not: they’re not a tax address for your business, and neither are they a virtual office. They don’t receive packages or regular correspondence on your behalf. Examples of documents that they’ll receive include:
- Lawsuit notifications and court summons
- Tax notices
- Corporate filings
- Wage garnishment notices
- Other official federal correspondence
As you’ve probably guessed, these are all important documents, so you need someone reliable, organized, who will notify you as soon as something comes in. If you appoint yourself as your company’s registered agent, not only is your privacy affected, but you also risk mixing federal notices with regular correspondence and suffer the consequences.
Keep in mind that after you start a business, you need a registered agent at all times. Also, if you expand to a new state, you’ll need an agent there too. For example, if you started your business in Colorado and decided to expand to Wyoming too, you’ll need to appoint a Wyoming registered agent.
Things to check before appointing a registered agent
The job of a registered agent might not seem that complicated, but if you don’t appoint someone trustworthy and responsive, many things can go wrong, including fines. So, before entrusting your Government correspondence to someone, make sure they thick the following boxes.
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Choose a nationwide provider to make things easier.
If you’re starting a small, local business and you’re certain you will never expand, then it makes sense to choose a local registered agent. However, if you plan on doing business in other states too, or you don’t totally exclude that possibility, save yourself the trouble and work with a nationwide provider. Businesses need to have an appointed registered agent in every state they operate, and if you hire several people, you’ll waste a lot of time managing them, and you might lose track of important documents along the way. But, if you work with a nationwide provider, they’ll organize all your notices and keep things more streamlined.
Professionalism is key
After you hire a registered agent, you should have the peace of mind that they’ll always be there to receive important documents and forward them as soon as they arrive. If they don’t, it’s your business that will be held accountable, not them. So, it really pays off to be selective with the process and double-check their track record. If your registered agent makes a habit out of going on vacations, misplacing your documents, or waiting until the last moment to inform you of critical notices, that puts your business at risk.
What software are they using?
Does your registered agent still use manual processes and snail mail? That’s an old and outdated practice that wastes time, money, and leads to many inaccuracies. Instead, go with an agent who uses dedicated software and can send you all your important documents electronically, in your desired format, as soon as they arrive. This software also helps them access, manage, and share reports and notices quickly, so that you have maximum time to respond. If you operate in multiple states, the use of the software is even more important.
What about pricing?
All business owners want to save money, especially in the beginning, when you have lots of expenses to think about. However, basing your selection process only on pricing can end up costing you more money in the long run. Think of it this way: if you appoint the registered agent who has the lowest rate, only to discover that they’re not responsive and forward critical notices too late, your life will be made really difficult, and you’d be at constant risk of a fine. So, instead, ask yourself: how much value am I getting for the money? If another agent has higher fees, but they have a longstanding reputation, they’re experts at navigating state regulations and always send you documents on time, it’s wiser in the long run to choose the latter.
At first sight, the job of a registered agent might not seem difficult or glamorous – and perhaps that’s why so many business owners decide to appoint themselves. However, keeping track of Government notices is much harder than it seems and, for your company’s efficiency and your own peace of mind, you should hire a professional registered agent.