Selecting a registered agent may feel like a daunting task. With so many service providers available, it may feel like who you select doesn't really matter. But registered agents provide a critical business service and it's important that you select a registered agent who is ready to be your partner in entity management.
What a Registered Agent Does
A registered agent’s basic duties include:
- To accept and forward service of process
- To forward annual report tax notices and other official documentation from the secretary of state to the entity contact
The ability to accept and forward service of process requires a registered agent to be available during standard business hours at their registered address. This is the legal requirement set forth by the state and is one of the main reasons that most business owners do not opt to be their own registered agent.
A good registered agent will also offer additional services such as email reminders, tax filing services, excellent customer service for easy additional filings and retrievals, as well as being a helpful point of contact for all of your entity management related questions.
What is Service of Process?
The biggest role that your registered agent serves is to accept and forward service of process, should you receive it.
Service of process is the delivery of the summons, complaint, or petition related to legal proceedings. It is most often delivered in person but can be delivered via certified mail or by posting on your door.
Statistics on Litigation Related to Small Businesses
Think your business won’t be sued? A Small Business Association study found that each year between 36 and 53 percent of small businesses (described as businesses with less than 500 employees) are involved in litigation. The majority of these cases involved contract, torts, civil rights, and labor related lawsuits.
The SBA study found that the cost of litigation ranged from $3,000 to $150,000 for study participants and that one-third spent less than $10,000. These costs have serious consequences, particularly for newer business. Litigation within the first two years of business reduced the survival rate of the business to 15.8% after two years; down from the typical 33% survival rate of businesses not involved in litigation.
So what happens when an attorney prepares a lawsuit to serve you or your business? They will serve you to the official business address on file – your registered agent. This is why it’s so important that your registered agent be a legitimate and reliable service. When the service of process is delivered to your registered agent, you need to be sure that your registered agent will get it to you in a timely manner.
What happens if you miss your Service of Process?
If you use your own address or an unreliable registered agent and are then unable to receive service of process, you’re at risk of not receiving your service or getting it too late.
Missing a court date or not having proper time to prepare your legal response could be detrimental to your business. In some cases if you do not respond to legal action against the business, you risk a default judgement, which means the suing party automatically prevails.
Public Relations and Privacy
It's also important to note the issues of public relations and privacy when considering where service of process will be received.
Often small businesses are started by a single business owner with one address - their home. The Covid-19 pandemic has also prompted many to start side gigs or to take their side gigs full time. These businesses often don't have office space and will use their home address for business purposes. This means that their home address will be public information. Some business owners may be okay with this, but many consider privacy and safety reasons and opt to hire a registered agent.
Additionally, if your business has a brick and mortar location (or multiple locations), are you comfortable with service of process being delivered there? Consider how it may look to customers in your coffee shop or restaurant if you're being served there. Do you feel confident having tax or legal documents delivered to the employees at those locations? This is yet another reason why business owners opt to hire a registered agent.
When the Process Goes Right
A quality registered agent will receive your service of process on your behalf and forward it to you promptly. This is one reason why it’s critically important that you keep your registered agent apprised of any changes of address.
When you receive service promptly, you are able to begin organizing your response, hiring an attorney, or preparing for court dates.
Need a Registered Agent?
The Incorporators provides registered agent services for Delaware entities. We've been a trusted partner for Delaware businesses for over 45 years (not to mention, our 5 star google rating). You can purchase registered agent services here or change your registered agent here. If you're changing from another service, your first year of registered agent services are free!
As always, feel free to give us a call at 800-223-3928 or email us at firstname.lastname@example.org.