Running a business is expensive, and entrepreneurs are always exploring ways to cut costs. And while some expenses are unavoidable, there are certain processes that you don’t have to spend money on.
For example, all LLCs or corporations are legally required to list a registered agent. When evaluating the most efficient and cost-effective way forward, many business owners ask a simple question: Can I be my own registered agent? The straightforward answer is yes, but it’s important to weigh the pros and cons of being your own agent.
What Is a Registered Agent?
Whether you’re setting up a limited liability company or a corporation, you’ll have to designate a registered agent. This is an individual or an entity tasked with handling all of the legal and government correspondence related to your business.
In other words, registered agents act as a channel through which the state can reach the owner(s) of every registered company. That’s the basic purpose of a registered agent. One scenario where this is especially important is when a business finds itself facing a lawsuit and needs to receive service of process documentation. A registered agent can also assist your business with everything, from legal services covering compliance requirements to mail forwarding.
Without a registered agent to act as a bridge between you and the state, you run the risk of missing filing deadlines or inadvertently failing to respond to lawsuits in a timely manner.
Should You Be Your Own Registered Agent?
We’ve established that it is impossible or rather illegal to run an LLC formation without a registered agent. So, should you become your business’s registered agent, or is it better to go with a professional service?
There are many different types of LLCs, but there is nothing in the law that stops you from becoming your own agent. Simply put, the owner of an LLC is legally permitted to act as a registered agent as long as the business is founded in the same state where the owner lives.
So, it all boils down to individual preferences. To help you make the right decision, here are some of the key advantages and disadvantages of serving as your business’s registered agent:
Pros of Being Your Own Registered Agent
It Helps Your Business Save Money
While employing the services of a professional registered agent isn’t the most expensive thing that your business will spend money on, you won’t be able to use those services free of charge. Serving as your own registered agent is the only sure way to avoid paying for the service. If you’re operating on a tight budget, you’ll certainly appreciate having the option to avoid this cost, which can typically go up to $300 per year.
It Can Be Very Convenient
When business owners are trying to figure out whether they should become their own agent, one of the critical factors to consider is how comfortable they are with this arrangement. If your daily routine already involves being at your business’s office during working hours, then being your own agent wouldn’t cause you any particular inconvenience.
Cons of Being Your Own Registered Agent
Always Be Present at the Physical Location
A major downside of being your business’s registered agent is that you have to be present at the physical location you list during all business hours, typically between 9 a.m. and 5 p.m. from Monday through Friday. This is the only way to ensure that you don’t miss any important and time-sensitive correspondence. Of course, you wouldn’t have to be there during federal holidays.
You Could Miss Important Deliveries
Circling back to an earlier point, it’s important to underscore the immense risk of missing deliveries of legal documents. Being constantly present at the listed location isn’t really possible from a practical standpoint. As such, stepping out for one moment at the wrong time can result in unnecessary inconveniences for your business.
Receiving a Lawsuit at Work
If your business is facing a lawsuit, then service of process documents will be sent to the listed address. Since you’re the business registered agent, you will be served the lawsuit at the relevant location. This can be embarrassing and undermine the credibility of your business if it happens in front of your employees or customers.
The Costs of Fighting Default
If you are not at the registered office when the process server shows up and you fail to receive the notice of the lawsuit on time, your business may face substantial costs for default judgments and lawyer fees. Ultimately, this defeats the purpose of trying to save money by being your own registered agent.
If You Use a Personal Address, It Becomes Public Record
If you are running a small business from your home, then being your own registered agent means your private home address becomes a public record. This can be a serious issue if you’re concerned about your privacy. And even if privacy isn’t your main concern, having both your business and personal affairs tied to the same address can become problematic after a while.
You Will Be Limited to Operating in One State
To become your own registered agent, you’ll need to show proof that you’re a resident in the state where your business operates. This limits your operations to the state that you’re registered in. Unless you’re willing to hire another registered agent, you won’t be able to expand and set up offices in other locations. Every state requires businesses to use a registered agent with a local address.
Should I Hire a Registered Agent Service?
After weighing the pros and cons, it’s clear that it isn’t advisable for business owners to become their own registered agents. This brings us to registered agent services.
First and foremost, hiring a professional service eliminates your exposure to all the aforementioned risks and downsides.
You can focus on running and growing your business, knowing that every legal document is being received and forwarded in a timely manner. When it comes to privacy, registered agents use their official business address, not yours. This means that sensitive information about your physical address is kept private. You also don’t need to make yourself available during working hours and can expand to as many states as you want.
When you’re starting your business, it’s perfectly natural to ask: Can I be my own registered agent? But there are many reasons to consider professional registered agents instead of taking this burden onto yourself.
Keeping up with all the compliance requirements set by the state where you’re forming your business can be tasking. A registered agent service can be a big help with things like filing annual reports. The service keeps tabs on your due dates and informs you about approaching deadlines.
The only real downside to hiring a professional agent is the cost. Prices vary, depending on who’s offering the services, but you typically expect to spend around $100 annually.
Whether you choose to act as your own registered agent or go with a professional service is entirely up to you. It’s perfectly legal to do both, but the former isn’t always advisable.
The downsides can outweigh the cost-cutting attempts by small businesses that are operating on a tight budget. So be sure to take a step back and carefully review all your options before appointing yourself as a registered agent.