As a small business owner you’re probably way too busy to think about what could happen if delivery of an important notice were attempted on the rare occasion that you’re out. But your state government has thought about it. In fact, they’ve thought about it to the extent that each state requires all corporations and limited liability companies to appoint a statutory agent for this very reason.
TL;DR (Too Long; Didn't Read)
A statutory agent is a third-party designated by a business to receive its legal and government notices.
Functions of a Statutory Agent
A statutory agent is an individual or business designated by you to receive your business's important notices like:
- Court summonses and subpoenas
- Corporate filing notices
- State and federal tax notifications
- Official local, state and federal government correspondence
- Employee wage garnishment notices
Consequences of No Statutory Agent
If your business is sued, the court has to be able to physically serve someone with the documents notifying you of the lawsuit. If you don’t have a statutory agent and happen to be out of town or taking a rare lunch out when the process server comes, you may not even realize you’re being sued. If you don’t know you’re being sued, you don’t show up in court and the judge will likely rule against you.
The IRS and some state governments send notices by mail, sometimes certified mail that requires a signature. A statutory agent will always be available during business hours to receive these letters and sign on your behalf. If you miss a notice of taxes owed, and don’t pay it or appeal it within a limited time frame, the consequences could seriously affect your finances and maybe even your ability to keep your business open.
Varieties of Statutory Agents
There are different types of statutory agents. A business can be a statutory agent. It just can’t be your own business. However, a specific officer of your business can be your statutory agent. In this situation, the statutory agent is listed with state government by name, not just their job title.
Some business owners designate their attorney as their statutory agent. Oftentimes it’s the same attorney who drafted the documents to establish the business.
Statutory Agent Services
Finally, there are statutory agent services; companies that operate to serve as the statutory agent for many clients. Fees for these services usually range from $120 to $175 a year. It’s hard to say which company offers the best registered agent service. You might have to do a little research to decide which one is best for you.
If you don’t designate a registered agent you may be fined by state governments. Additionally, in many states a business is not allowed to operate until a statutory agent is appointed.
Don’t Be Your Own Agent
Making yourself the statutory agent for your own business is a bad idea. An agent’s address has to be a physical place in each state where you do business. Post office boxes won’t work and using your home address is not wise. There’s the issue of privacy, but more than that, you probably don’t want a process server or ticked off litigant knocking on your front door.
Other risks of being a registered agent for your own business include not being home when delivery of a notice is attempted and forgetting to notify each state you do business in of an address change. Finally, you’re supposed to have a registered agent with a brick and mortar location in every state where you do business. That would cost a fortune, particularly if you have an online business, and you certainly cannot be at all locations at once.