All 50 states require that all LLCs designate a registered agent for their business. This agent is the point of contact between the business and the state. And electing someone or a company to serve this role is integral to the success of your business. You may wonder what could happen if you decide not to have a registered agent. Let’s shed more light on this to help you understand the risks attached to such a move:
What Does a Registered Agent Do?
A registered agent serves as an intermediary between the state and the LLC. Their work is to receive official correspondence and ensure you get it on time. Some of the vital documents they receive include:
- Tax Notices,
- Compliance Reminders, and
- Service of Process.
Due to the nature of these documents, the state requires that you hire a registered agent who meets the following criteria:
- They should be at least 18 years old or have incorporation in the state where your business operates,
- They should have a physical address in the state your business operates,
- They should be available during regular business hours, and
- They should be residents of the state in which your business operates.
Please note that different states have differing requirements.
Likely Penalties of Not Designating a Registered Agent
Please consider the following risks if you’re thinking of not hiring a registered agent:
a) Inability to Register an LLC
Per the law, you must elect someone or a company to serve as your registered agent when starting an LLC. Please note that your LLC paperwork will not be accepted at the state level if you do not select someone. So, without a registered agent, you cannot create an LLC. And that means you cannot legally conduct your business.
b) Racking Up Fines and Penalties
A registered agent receives official correspondence on behalf of the business. Without an agent, you would thus miss out on tax notices. And when you do not pay your taxes on time and fall behind, you incur fines and penalties. This financial burden could undo all the work you have put into your business.
c) Loss of Good Standing
An agent ensures you get all your compliance documents on time. You do not get updates and reminders regarding upcoming deadlines when you do not have an agent. After all, nobody will be around to receive the documents on your behalf. Thus, you could fail to submit your annual or biennial reports on time. And per state laws, you can lose your good standing if you fail to submit these documents on time.
d) Losses in Lawsuits
Your business deserves due process. And your registered agent serves as the point of contact to allow service of process. Being served on time enables you to respond to lawsuits, ensuring you have a fighting chance. Otherwise, you will not respond to the lawsuits and can lose the case without knowing it existed. Some of these lawsuits can have dire consequences that can affect the financial standing of your business.
e) Automatic Dissolution
When you fail to comply with submitting your annual or biennial records on time, your LLC can suffer automatic dissolution. In this case, your business would not have the right to offer services or sell products in the state as it would not legally exist. You would not have a corporate veil protecting you, and that would threaten all the financial progress you have made over the years.
Hiring a registered agent service can help you avoid all these and more risks.