What Does a Registered Agent Do?

Last week I met with a small business owner whose registered agent had access to her business bank accounts.  A short investigation revealed this particular registered agent had formed dozens of corporations and named himself secretary, giving him access to the bank accounts.  We quickly dissolved the corporation and reformed an LLC with no one but the business owner having access to the company’s money.

Registered agents are required for businesses but serve a very limited purpose – they provide a physical location where a human being can accept service (lawsuits and official papers from the state or taxation departments) on behalf of the company during business hours.  The business owner can act as his or her own registered agent, but it may be difficult to ensure someone is available either in the office or at home during business hours year-round.  There are a number of commercial registered agent services, charging anywhere from $100-$400 per year.  Some business owners prefer to have their lawyer serve as registered agent so that a lawsuit can be addressed more quickly. 

I can’t think of a situation where a registered agent who isn’t otherwise involved in the company would need access to the company’s bank accounts or be named an officer in the company.  This particular small business owner completely trusted the advice of this registered agent, and her business was placed at serious risk.

Small business owners can learn two lessons from this situation:

1) Be sure you understand what role someone should have in your company, whether it’s your registered agent, your lawyer or your accountant. 

2) Be sure you understand the professional advice you’re receiving.  If you aren’t sure why your registered agent is listing himself as secretary, why your lawyer has decided you should be an LLC rather than a corporation, or why your accountant has advised you to elect subchapter-S status, ask.  An advisor worth his salt will be able to explain why.  If he can’t, find someone else.