If you are forming a Delaware company and also happen to live in Delaware, then you may find yourself in a unique situation. Every company (no matter what type of business entity) formed in Delaware is required to have a Registered Agent in this state. Therefore, if you have a Delaware address, then you or the business entity could perhaps act as the Registered Agent for the new company. Sound like a good plan? Well, not so fast.
The Delaware Secretary of State has a list of requirements for Registered Agents in the state of Delaware. First and foremost, the Registered Agent must maintain a physical address in this state; thus, a Delaware post office box is not an option if you want to qualify as your own Registered Agent.
Furthermore, the Registered Office location must be staffed and open for business at reasonable times (generally considered 9 AM to 5 PM, Monday through Friday) in order to accept any potential service of process served upon the entity it represents. Thus you couldn’t (hypothetically) rent empty office space in order to act as your company's Registered Agent. The Secretary of State takes the matter seriously and actually visits Registered Agent offices to investigate the validity of their existence. On several occasions, the Secretary of State has imposed sanctions on fictitious offices it has discovered. In addition to the likely sanctions, you need to consider the cost factor of renting office space versus just paying an annual fee to a Registered Agent. The latter is much more cost-efficient.
Let’s say you are a Delaware homeowner and want to act as a Registered Agent for your new entity. When you form the company, you list your home address as the Registered Agent office. Since the initial corporate documents are public record, your home address is now available to anyone who performs a search of Delaware companies. Now you have potentially opened yourself to mass market mailings, spammers, sales people and telemarketers.
Every year, the Secretary of State sends one, and only one, written notice to the Registered Agent regarding the entity’s annual Franchise Tax fees. It is mailed approximately three months before the due date. How easy is it to misplace or forget about that single piece of paper? If the payment is not received on time, the state will levy a late penalty, plus interest. If you contact the office and tell them you cannot find your original notice, the state representatives will not make any reductions or waivers on the outstanding fees. You will still owe your Franchise Tax, the late penalty and the interest.
What if you are acting as your own Registered Agent and need to update your address with the Secretary of State? You would need to file a certificate with the state office and pay a filing fee upwards of $50. You have to deal with the hassle of filing paperwork with the state and sending more money, simply because you moved and need to update your address. This is the biggest complaint from people who act as their own Registered Agent; think about how many times an office's address can change over the lifetime of a business. Each time, you will have to undertake a significant amount of additional work and pay extra money to let the state of Delaware know so it is aware of your current mailing address, on top of the other numerous burdens involved with moving.
Instead of going through all these hassles, you can enlist the services of a reputable and established Registered Office in the state of Delaware, such as Harvard Business Services, Inc. We have standard business office hours and a Mail Center staffed with several personnel to accept any service of process that may arrive for an entity. Also, your entity’s documentation will list our Registered Agent address on file with the state of Delaware rather than your home address and personal details.
We realize that one written notice in regards to an important annual bill, such as the Franchise Tax, is simply not enough for most people. Therefore, we send multiple reminders via email and regular mail in order to ensure that our clients have ample time to make payment arrangements. What happens when your entity is registered with Harvard Business Services, Inc. and you need to make an address change? Not a problem. Simply contact our office and provide us with the new details so all future notices and correspondence are sent to the proper address.
The reality is that it can be less of a hardship to form a company with a Registered Agent as opposed to trying to act as your own agent.
There are 2 comments left for Dangers of Being Your Own Registered Agent
I use HBS as my RA. Very easy to pay such a nominal amount to be hassle free!
As a non-resident, I read the article just out of curiosity, but I noticed one thing. I experienced other DE RAs, and I didn't find them nearly as helpful and fairly priced as HBS - so the strong argument about using a professional RA only makes sense to me if you go to HBS... No, I'm not paid to say that :-.