If you own or operate a corporation, limited liability company (LLC), or limited partnership (LP), one of the main legal compliance steps you'll need to address is the appointment of a Registered Agent, also known as an agent for service of process (SOP).
SOP is the procedure through which a person filing a lawsuit against a business provides that party with notice of the claim or dispute. Notice is provided to a Registered Agent, essentially an individual or business organization appointed by your business who is authorized to receive legal documents on the principal's behalf.
But that's not all. A Registered Agent deals with much more than the receipt of the summons or complaint. They are also the designated party to receive other important documents such as:
- Wage garnishment orders
- Compliance correspondence from the government for annual report and tax filings
- Subpoenas for testimony or company records
- Court summons
As you can see, that's quite a bit of responsibility! Handled improperly, legal papers and other important documents like these can put your business at risk.
THE IMPORTANCE OF PROPER HANDLING OF PROCESS
Handling the legal documents that are served on a business in an accurate, reliable and timely manner is critical to reducing the risk of default judgments. Other documents such as annual reports must be handled in a similar fashion to ensure you company maintains its good standing.
That's because the delivery of legal documents via SOP triggers important timelines and other legal obligations. If you fail to deal with these in a timely manner, there may be serious consequences for your business or the person for whom the document was intended. For example, failing to respond promptly to a summons and compliant can result in a costly default judgment being entered against the person being sued. A court may even punish an entity or person with contempt for failing to comply with subpoenas and other court orders.
WHO CAN RECEIVE SERVICE OF PROCESS?
A key part of organizing your business, whether as a corporation, LLC or LP, is the appointment of a Registered Agent. State law requires this person be maintained in the state in which your business is incorporated or formed, and in each state in which it is registered (aka qualified) to do business.
A Registered Agent can be an individual or an entity, such as a corporation. In a legal dispute, a plaintiff doesn't have to serve papers on the Registered Agent. SOP rules typically allow an officer, managing agent, general agent, or other persons authorized by your company or by law to receive SOP documents. That said, plaintiffs often prefer to serve a Registered Agent for two reasons:
1. A Registered Agent is easier to locate. A plaintiff need only check the Secretary of State (or equivalent filing
office) records to find their name.
2. Serving a person other than the Registered Agent can be costly. Time-consuming and expensive disputes can arise if there is any doubt as to whether the person served was authorized by the defendant to receive
process on its behalf.
CAN I BE MY OWN REGISTERED AGENT?
This is a common question asked by businesses operating as corporations, LLCs or LPs. The answer is generally yes. (Note that in most states, the entity itself cannot act as its own Registered Agent, but it can name its owner, an officer, employee or other person associated with the entity.)
However, doing so is a risky move.
For example, if a process server comes to deliver a document and you are not there to receive it (or if you receive it and mishandle it), you face fines, penalties and legal repercussions. The same risks are introduced if that person leaves the business, dies, moves out of state, or otherwise can no longer serve as Registered Agent and the state is not notified and a new agent appointed.
If you are in any doubt as to whether you can be your own agent for SOP, bear the following in mind:
- Registered Agents must be physically present at the office during normal business hours, year-round.
- Your business must have expert, trained professionals on staff who will recognize important documents and relay them to the correct individuals.
The consequences of failing to meet these criteria can be devastating. Consider these scenarios taken from actual court decisions:
- Inbox Overflow - An assistant receives documents and drops them into an inbox. The agent for SOP fails to check the inbox and a $150,000 default judgment is brought against the LLC.
- Out of Office - An individual Registered Agent is out of the country for weeks. A $29,000 default judgment ensues.
- Mail Room Mix-Up - A company receives documents, but legal counsel never saw them. With over $7.5 million in damages at issue, a default judgment is issued.
These are just some of the risks inherent in choosing an individual to act as your Registered Agent.
BENEFITS OF WORKING WITH A PROFESSIONAL REGISTERED AGENT SERVICE
At the end of the day, it's up to you to decide if you want to act as your own agent - although it's worth getting the advice of counsel on this matter also. Alternatively, consider the benefits of working with a professional Registered Agent service.
A professional Registered Agent service can eliminate the burden of handling important legal documents promptly and correctly, and reduce the financial risk of non-compliance to your business.
Registered Agent services can connect you with professionals who are trained on service of process. Agents are available during all business hours with a discreet address that protects your privacy and keeps process servers away from your business. In addition, you will benefit from compliance alerts and other services that help you manage your business.
Backed by a worldwide network of experienced local agents, CLAS specializes in providing Registered Agent representation in all 50 states, the District of Columbia and many foreign jurisdictions. With over one million Service of Process deliveries to date, you can trust CLAS’s network to handle all your important documents with care and reliability.
To learn more about Registered Agent representation with CLAS, visit our Registered Agent services page here.
Still have questions? Contact CLAS today at 800.952.5696 or firstname.lastname@example.org. Or, simply click on Contact CLAS and a representative will get back to you shortly.
For informational purposes only; content does not constitute legal advice.
Content courtesy of CT Corporation, a CLAS partner in Registered Agent services.