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This story originally appeared on ValueWalk
California has the largest economy of any American state, and indeed outranks many countries. While the state boasts high taxes and bureaucracy, it is such a large market that it is vital paying attention to. Here is what you need to know about setting up a corporation in California.
California requires that every business registered in the state list a registered agent, often referred to as a service of process agent there. A registered agent receives all communications from the State of California and service of process if someone files a lawsuit against the business.
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Here are some things to keep in mind when choosing the registered agent for your business.
Why You Might Want To Use A Professional Service
Registered agents are also known as resident agents or statutory agents, and they can be a person or an entity. Many business owners elect to use a professional registered agent service for several reasons.
It may seem natural to appoint yourself or someone else at your business as the registered agent, but that might not be a good idea. Whoever is designated as the registered agent must be available at all times during regular business hours of 9 a.m. to 5 p.m. to receive documents.
If it’s an individual, it means the person can never go on vacation or even step out of the office to go to lunch. If your registered agent isn’t available when legal or tax documents must be delivered, the consequences can be severe. A professional registered agent service will have personnel available all the time during regular business hours, so it isn’t dependent on just one person being available every minute of the working day throughout the year.
This reason alone might be enough to convince you that a professional registered agent service would be a good idea, but it’s not the only reason.
Compliance Reminders, Privacy And Discretion
Professional services also keep a compliance calendar and remind you when state filings or annual reports are due. They will also help you file them so that you don’t have to worry about getting things correct. Completing your filings on time every time will keep your business in good standing with the state and helps you avoid fines.
A registered agent will also scan all the documents you receive and share them with you online so that you have easy access to them as soon as they are received. Additionally, people who work from home may prefer a professional registered agent service because it keeps their home address private. The registered agent’s address must be published publicly on the business entities search in the state you are registered with.
Further, having a professional registered agent service prevents notices for lawsuits or other embarrassing matters from being delivered in front of customers or employees. A professional registered agent will share such documents with you privately and discretely, enabling you to avoid embarrassment.
What To Look For In A Registered Agent
If you’ve decided to look for a professional registered agent, there are some things you should look for in a service before signing on. If you used a company to create the formation documentation for your LLC or articles of incorporation, they might offer a registered agent service. The simplest solution would be to use the same company as your registered agent.
If you didn’t use a business formation firm, you would need to start from scratch in your search for a registered agent. Some services are pretty standard, but you should still talk to a few different firms and compare their offerings before selecting one.
Online storage is certainly a must-have because it will provide you with easy access to all your important documents, even when you are on the go. This could be very useful because sometimes you will need to pull up one of those documents while you are at a bank or lawyer’s office.
A registered agent is required to have a physical address in the state in which your business is located, so you can’t use an out-of-state firm. They must be able to receive notices at that address. Some registered agent services offer national coverage for companies with locations in multiple states. To access their services in other states, you may just have to pay a slightly higher fee.
Final Thoughts
Many business owners think they will file their articles of organization or incorporation first and then designate a registered agent later, but the document will ask you to list your registered agent. Thus, you must have one in place before you file the formation documents for your business.
It doesn’t cost anything but time if you act as your own registered agent, but you must be available between 9 a.m. and 5 p.m. every business day. Many business owners don’t realize this when they designate their registered agent, so they automatically name themselves to the position.
If you have made this error, you can file a document with the state to change your registered agent. It’s a simple fix, and some registered agent services might even help you with the filing when you switch to them. Registered agent services typically cost between $50 and $300 a year, depending on what you need.
TRUiC has compiled a guide to help you learn more about registered agents in California here.
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