We've all seen it on TV and in movies - someone abruptly hands an envelope to a character and says, "You've been served". It's a dramatic moment that you probably think would never happen to you. But as a business owner, it very well could.
Today we're taking a look at what service of process means, how likely you are to be involved in litigation, how you'll be notified if you've received service of process, what you can do to ensure you receive service of process in a timely fashion, and more.
What is Service of Process?
The United States constitution's due process clause requires that defendants be given proper notice of proceedings before the court. Service of Process is the notification that an individual or business receives that they are involved in litigation.
Service of process is incredibly important because it establishes that the court hearing the lawsuit has jurisdiction over the defendant and enables the defendant to respond to the proceeding before the court.
Statistics on Litigation Involving Small Businesses
According to a study by the Small Business Administration, between 36 and 53 percent of small businesses are involved in some type of litigation each year. This includes litigation where the business was the plaintiff or the defendant.
The study showed that the most common types of suits that small businesses are involved in are contract and tort related.
Small businesses are significantly less likely to have in-house counsel to handle litigation. The SBA study found that of the study participants, none had in-house counsel and 78% had an existing relationship with an attorney.
Legal costs for small businesses interviewed for the study ranged from $3,000 to $150,000 with a third of respondents noting a number below $10,000. This means the for two-thirds of the businesses interviewed, the cost of litigation exceeded $10,000.
Is your business prepared for the potential costs of litigation? Missing your receipt of service of process could cause you delay in seeking counsel or worse, could result in missed hearings or response deadlines.
Where You'll be Served
If your business is involved in some type of litigation, you will receive service of process at your registered business address.
As a business, you are required to be available to receive service of process during normal business hours.
If your LLC is set up for your side hustle but you aren't home all day, you are required to appoint someone who is able to receive service on your behalf. If you have a storefront, you'll want to make sure that all employees know what to do in the event that they are the ones who receive service of process. In both of these situations, most business owners feel more comfortable utilizing a registered agent who can receive their service of process instead.
Businesses who form their entities in the state of Delaware but have no physical locations in Delaware are required to have a registered agent. Learn more about what a registered agent does here.
Businesses who have a registered agent will receive service of process to their registered agent. The registered agent will then forward the service of process to you in a timely fashion. In fact, this is one of the most important parts of the job of a registered agent.
How You Will Receive Service of Process
If The Incorporators is your registered agent and we accept service of process on your behalf, you can be assured that we will take great care in getting it to your promptly. Upon receipt, we will immediately forward it to you via certified mail with a return receipt requested. We will send it to the address we have on file for you.
This is also one of the reasons why it's of utmost importance that we always have your contact information up-to-date. The consequences of not keeping your registered agent updated with your current contact information could be costly and time-consuming; your registered agent could resign, you could miss tax notifications, or as we are discussing, you may not receive service of process promptly.
What Your Registered Agent Can Do
The date you are served often determines your deadline for filing a response so receiving notice of service of process is critical.
Registered agents in the state of Delaware are required to be generally available during normal business hours to accept service of process on behalf of their clients. By utilizing registered agent services, you're ensuring that you'll receive any service of process in a timely fashion.
Can You Refuse Service of Process?
If you are utilizing a registered agent, service upon the registered agent is considered "effective service upon the entity".
If we forward you the service of process via certified mail and you refuse to accept the certified mail, you have still been served because that took place when we received the service on your behalf. The litigation will proceed and you will likely end up with a default judgment against you.
It is important to remember that if your registered agent is served on your behalf, you have been served.
Avoiding litigation may not be possible for many businesses. That's why it's important to maintain appropriate insurance for your business, have an attorney look over all contracts, and keep your contact information up-to-date with your registered agent. Your attorney is the person who is best able to advise you on how to protect your business in the event of litigation.
If you have any questions about how we handle service of process or our registered agent services, please give us a call at 800-223-3928 or contact us. You can also make us your Delaware registered agent here with our easy online form.