United States business formation law is all state specific, not federal. Within the footprint of the state, companies formed in that state need to maintain an “agent” at all times. This agent has to have a fixed office address on record with the company’s file. That makes this office the “registered office” and the business or individual servicing that office the “Registered Agent”. This agent is designated to receive “service of process” when the company it represents is sued. Since most businesses are not physically located in Delaware, they must have a third party serve as their agent. This is where you need to be careful when you incorporate a company because not all agents meet “minimum guidelines” much less industry best practices.
When the Sheriff or process server comes knocking, trying to find a company, states have a public policy of not wanting these artificial entities from being able to avoid service. Therefore the solution all states adopted is to require that a Registered Agent be named in the initial incorporation or formation filing. Requiring a Registered Agent gives an aggrieved plaintiff a contact for the company so the company cannot avoid service. The agent is responsible to maintain a functioning address in the state of incorporation where service of process can be received and is required to be open during normal business hours to receive process and forward it to the company. A Registered Agent is necessary for the company to maintain good standing status.
The risk in naming an agent is the risk the Registered Agent will not serve as you expect, mainly forward to you lawsuits and franchise tax notices, to avoid default judgments. When IncNow forms an LLC in the Secretary of State’s filing system, we are providing our business address, not the address of the company being formed. Before we submit the Certificate of Formation to the state, one of our officers signs the formation documents that are uploaded to the state’s computer filing system.
Surprisingly there is no application or review process to be a Commercial Registered Agent. However, in Delaware, if a Registered Agent has more than 50 companies for which it serves as agent, it is automatically deemed to be a Commercial Registered Agent and will be required to satisfy these tests under the law. Delaware audits this process and reserves the right to disallow filings from agents who fail this test. Delaware Division of Corporations has threatened suit against approximately 11 agents for failing to follow the law, ten of those agents came back into compliance, one was shut down by the court. For example, it is required that a Commercial Registered Agent in Delaware must be open during business hours and have a managing agent who is a human being located in Delaware. A Commercial Registered Agent must keep the name, address and phone number of a contact person for every entity it represents.
Not all registered agents are created equal. With more than 200 commercial registered agents in Delaware, how do you choose one? Some are run by attorneys. Others are operated out of an apartment by someone in pajamas. Price is not the only factor to consider when selecting a registered agent. Simply being “registered” should not suggest they are necessarily worthy of your business.
Agents and Corporations, Inc. is attorney-managed, family-run and has been a Registered Agent in Delaware for more than 40 years. Enlisting a reputable and responsible agent is critical to ensure proper corporate maintenance.