By James Gilmer
The COVID-19 pandemic has changed our way of doing business. Companies across the United States have adopted policies and procedures to ensure both continuous operation and employee safety. Most notably, many businesses have moved to a remote working environment. While a remote arrangement has plenty of benefits, small business owners should be aware of compliance considerations.
In particular, small business owners should take this time to review their registered agents in each state. The registered agent is a legally designated point of contact for a business in state record. When courts, process servers, and state agencies want to get in touch with your business, they will almost always contact the registered agent.
In nearly every state, the registered agent must maintain a physical address and be available to receive legal and government notices during regular business hours. Documents, such as service of process, subpoenas, and wage garnishments are delivered to the registered agent in person. They usually require a signature from an individual on-site to confirm receipt. These documents are time sensitive, and typically require a response or action within a few days or weeks.
In light of COVID-19, many businesses may find themselves at risk of noncompliance without even knowing it. Because the registered agent generally only needs a physical address in the state, many business owners simply list their company address in the state record. Under “normal” circumstances, this may be a suitable arrangement. After all, before COVID-19, where else would they be during regular business hours?
Now, with the vast majority of non-essential employees (and business owners) working from home, this creates a clear gap. Physical places of business that were once fully staffed during regular business hours are largely empty. And, with no one available to receive service of process, the chances of a missed delivery increase greatly.
Again, remember that the registered agent doesn’t receive and handle routine mail. Appointing a registered agent that fails in its legal duties can lead to costly consequences for the business. Missing a time-sensitive legal document can result in legal actions against your business without your knowledge. A court may rule a default judgment. The state may dissolve your business following administrative protocol.
Identify and close potential compliance gaps
So, as a business owner, how do you close the gap? Believe it or not, the solution is fairly simple.
The first step is to know who your current registered agents are. Every state has a publicly searchable database where you can look up your business entity and its registered agent. If your business is registered in multiple states, or if you have multiple entities, be sure to repeat the process. If your business maintains any professional licenses, be sure to contact the relevant licensing agencies and boards. You may have been required to appoint a registered agent in order to become licensed.
The results of this due diligence may surprise you. As your business evolved and grew, you may have appointed a combination of registered agents, including individuals, law firms, and service companies. You may notice certain addresses are out-of-date. You may even find individuals and vendors who are no longer associated with your company!
Ensure all paperwork is up-to-date
Once you know who your registered agents are, it’s time to take action. In every state, businesses are required to maintain a current registered agent. This means you may need to file paperwork with the secretary of state to update your business’s registered agent. Don’t forget, during COVID-19, even if your correct business address is listed in the state record, you may need to file a change to help ensure that you still receive critical legal and government notices.
If your business consists of multiple entities, registers in multiple states, or is operating remotely, consider appointing a registered agent service company. Even during these unprecedented times, registered agent companies are staffed and available to receive deliveries on behalf of your business. Choosing a nationwide registered agent provider helps you meet requirements anywhere your business grows. And, using one registered agent for all of your needs simplifies your vendor management and accounts payable.
If you choose to keep your place of business listed in the state record, ensure that any individuals on-site understand the importance of their role. This may involve implementing training and processes for employees who could come into contact with process servers. Each person should know why these documents are being served at your place of business. They should be able to contact you, your legal counsel, or the appropriate parties at a moment’s notice. And they should have the tools to forward the documents to you.
On an ongoing basis, review your registered agents and other ongoing compliance responsibilities. As your business grows and expands into other states, ensure your registered agent meets the requirements in those places. And, like any other strategy, make adjustments if you find your current approach is too costly or too risky.
Preparation is key
No business owner wants to deal with a lawsuit. If and when it happens, proper preparation is key, and it all starts with the business’s registered agent. Overall, the process of researching your business’s registered agents and filing to update public records may take only a few hours, and the upside is tremendous.
By going through this process, you identify and close potential compliance gaps. Even more, you may find some peace of mind knowing that you have a network of responsible vendors and individuals as your company’s registered agent. And, during COVID-19, peace of mind is something we could all use right now.
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Disclaimer: Harbor Compliance does not provide tax, financial, or legal advice. Use of our services does not create an attorney-client relationship. Harbor Compliance is not acting as your attorney and does not review information you provide to us for legal accuracy or sufficiency.