It makes a lot of sense to incorporate when you’re running a business in California, but there are rules you have to follow. One of the most basic rules is that your corporation must have a registered agent. Without it, you run the risk of having your corporation dissolved, whether you like it or not.
What Does a Registered Agent Do?
The registered agent has 2 jobs, both of which are related to one another. These are seemingly simple jobs, but they’re crucial to the welfare of your corporation.
The first job of the registered agent is to receive various official documents meant for your corporation. These official documents generally include:
- Tax forms
- Official notices from the California Secretary of State, such as a request a particular report
- Various legal documents, like the certificate of good standing
- Any summons if your corporation is being sued
Sometimes other companies may send junk mail and various solicitations for your corporation through your registered agent. The registered agent can deal with these items themselves and won’t bother you with them.
The other job of the registered agent is to notify you of these received documents, and then pass on the copies of these documents to you. Professional registered agents can maintain an online storage site for these documents, and it’s a simple matter of notifying you of the received documents through email. You can then just look over the documents online or download them.
Most of the time, registered agents expand their responsibilities by letting you know that your corporation has to submit a certain report within a certain period of time. Thus, they make sure your corporation maintains its good standing with the state of California by helping you comply with legal requirements on time.
Who Can Be a Registered Agent?
Technically speaking, plenty of people can be your registered agent. They can be your friend or relative, whom you can trust to do the job. It can be any officer or employee of your corporation. You can even appoint yourself as the registered agent.
The registered agent just has to meet a few requirements:
- They have to be an adult—at least 18 years old.
- They need to have a physical address in the state of California, and not just a mail service, private mailbox, or a P.O. box.
- Need to be present in that location to receive the official documents personally, during business hours. They simply can’t be absent—some have to be there to receive those documents.
Of course, you can always just go and hire a professional registered agent service. In fact, many of the better online incorporation services will also offer a registered agent service as part of their incorporation packages.
How To Designate A Registered Agent In California
In the State of California, you’ll have to designate a Registered Agent irrespective of the business structure you’re planning to run, be it a Corporation or an LLC. The designation of the registered agent will be done at the time when you file the Articles of Organization if you’re forming an LLC or the Articles of Incorporation if you’re a Corporation.
You’ll be required to include the name of the registered agent and his or her address.
How Do California Residents Get Served?
As explained above, one of the most important duties of a registered agent is receiving the summons. For summons to be processed in the State of California, a draft of the complaint must first be made by the plaintiff. The complaint must explain the reason for the claim and the demand for compensation. There are different complaint forms for different counties. The complaint forms can be found on the State of California court website and then submitted to the right clerk after it has been completed. The clerk will give specific instructions to the plaintiff on how to serve the summons to the registered agent of the defendant. The plaintiff can also hire the office of the local sheriff’s office in California to help serve the summons to the resident agent of the defendant.
How Do I Change My Registered Agent In California?
To change the Registered Agent of your business in the State of California, file for the Statement of Information form with the Secretary of the State of California. You have to be aware that the type of document you’ll file as well as the filing fee differs depending on your business structure. For example, you’ll have to complete the Statement of information for Stock Corporation if you run a Stock Corporation or Statement of information for a non-profit corporation if you run a non-profit corporation. Meanwhile, if you run an LLC, you’ll need to complete the Statement of information for LLC. The filing fee is a sum of 25 dollars for corporations and 20 dollars for LLCs. The process can be completed online through either this link for corporations or through this for LLCs. You can also choose the non-electronic means of completing the process by submitting it through the mail or in person.
What is the penalty for non-compliance?
There are serious penalties for non-compliance in the State of California. Your business can lose its good standing with the State of California which may lead to the State of California dissolving your business administratively/involuntarily. If you don’t have a Registered Agent or your registered agent is not available, it will be difficult for you or your business to be served a summons, and as such a court can proceed with the lawsuit without you or your knowledge which may lead to an unfavorable judgment against you or/and your business.
Why Should You Hire a Registered Agent Service?
It’s true that you can assign some “in-house”, like an employee or even yourself, as the registered agent for your corporation. But most experts agree that a professional registered agent service is the better option.
Sure, you have to pay for the service each year. But they don’t cost much, and Some of the best services cost only $50 – $300 each year.
In return, you get the following benefits:
Online Storage for All Your Documents
A good registered agent service will immediately scan all the official documents they receive on behalf of your corporation. While they may also mail you the documents, you will always have digital copies available online for download.
Keep in mind that plenty of online incorporation services also offer registered agent services (usually as part of the incorporation package). That means you have all your corporate documents, including your formation documents, in one convenient online storage location. Any officer or employee who does business for your corporation can then download a copy of any official document as needed. They can download any required document when they:
- Apply for a small business loan
- Apply for a business credit card
- Open a business bank account
A good professional registered agent service will maintain and consult a proper compliance calendar. They can then notify you with ample warning whenever a particular report or any other filing is due for a certain day. In some cases, the registered agent service can even help file those files as well. This is a crucial benefit because it helps make sure that your corporation keeps its good standing with the state. Failure to comply with requirements on time can lead to fines and other legal issues. Imagine what will happen if you’re sued and you don’t know anything about it.
Discreet Reception of Official Documents
Sometimes you don’t want to publicize the fact that your corporation has received certain official documents, such as a service of process for a lawsuit. Receiving a summons in front of clients and customers can tarnish the reputation of your corporation. Even receiving these documents in front of employees can hurt company morale.
With a professional registered agent service, you receive these documents discreetly. You can go about your business without anyone the wiser, and you can spread the news to your employees at your own discretion.
Freedom and Flexibility
If you’re your own registered agent, then you have 2 requirements. One is that you have to maintain a physical address in California. That can be a problem if you’re running an online business or a business outside California as you’d have to rent an office and then you have to be there yourself during business hours. You can’t be absent from your post unless you have someone subbing for you. So, you’re tied down to that particular location—you can’t as well go to the bank or meet clients outside.
It becomes a huge problem when you’re running an online business and you want to operate in several states. You’d have to rent an office for each state. But with a professional registered agent service, you’re sure that there’s a physical location for receiving documents in all 50 states.
You also can’t be in 2 places at once. The professional registered agent service, on the other hand, will have several people in each location, so that there’s always someone there to receive the documents for your corporation.
If you use your office or your home as your registered agent address, then you’d have to notify the California Secretary of State if you change locations. You won’t have to bother if you move when you have a professional registered agent service.
Using your home or your office as the location of your registered agent also publicizes your address and it can be found in the Business Entity Search for the State of California which means that you may end up with irate customers with complaints showing up on your front door.
Is the registered agent really necessary?
Yes, it’s required by law if you’re running a corporation in California. In fact, it’s required in almost all states (with the exception of New York state).
Do I have to hire a statutory agent instead of a registered agent?
They’re the same thing. There are several alternate terms for registered agents, including statutory agents, registered agents, and sometimes service of process agents, for example in the State of California.
How much does a California Registered agent cost?
How do I become the registered agent of my corporation?
There are several ways:
- When you file the formation documents of your new corporation, the documents can have you listed as the registered agent for the corporation.
- If you have a registered agent and you want to replace them with yourself, you can file the change of registered agent form with the California Secretary of State.
Can’t I just hire a virtual office to do the job of a registered agent?
It’s true that a virtual office can seem similar to a registered agent service. You have an actual office location managed by a 3rd party, and it can include a live receptionist. They may even include mail receipt and mail forwarding services as part of their services.
However, they’re not the same. A virtual office is fine for receiving regular mail. But the registered agent service is expressly meant for receiving official documents—and they’re more important. The registered agent service will immediately digitize the mail, keep them in online storage, and send you the copies, and many virtual offices can’t do the same thing.
In addition, the virtual office doesn’t normally have the experience of keeping a compliance calendar. They won’t know when your corporation has to comply with certain requirements, such as filing the annual report by a certain date.
Is a business owner the same as a registered agent?
No, though it’s true that a business owner can also act as a registered agent, however, the two do not play the same role as a registered agent. The role of a registered agent is to receive various official documents on behalf of the corporation.
Service of Process; what does it mean?
Service of process refers to collecting legal documents like a summons; which is an order to appear before a court because of a waiting court case.
Are there any free registered agent services?
Technically, you will have to spend some money. However, the term “free registered agent services” may refer to what some online incorporation services offer as incorporation packages. Some of the best online incorporation services charge only a modest fee to file your formation documents for you. But they may also act as your registered agent, without an additional charge. This is a terrific offer.
However, the “free” aspect may only last a single year. You generally have to renew the services each year, and you’d have to pay for the registered agent services for the following year.
Can’t a family member (like a spouse) act as my registered agent?
Yes, they can and you may even have your own home listed as your registered agent address. But they have to stay home to receive the documents during business hours. They can’t leave without anybody at home.
In addition, you will then have your address listed in public records. That won’t do much for your privacy.
What happens if the registered agent service doesn’t forward the received official documents?
They can be held liable. But this basically never happens, especially with the more reputable services. With the good services, they have people (not just one) in the physical address to receive the official documents. They then scan the documents immediately and then give you official notice regarding the documents.
This usually only happens when you don’t use a professional registered agent service. If you have a buddy acting as your registered agent, then they may just forget to tell you about it!
Even if it’s not a legal requirement to have a registered agent for your California corporation, it’s simply a good idea that you can’t ignore. In fact, you’re better off getting a professional registered agent service working for you. The benefits are numerous, but the costs are minimal.