What is a Registered Agent?
January 24, 2013 | By David Khirallah
One of the most common questions we get from our startup and small business clients are: What is a registered agent? What do they do? Why do I need one?
Hopefully, this brief blog will help answer some of these questions.
A registered agent serves as the official “contact person” for a business. A business must officially designate a registered agent to receive and accept any lawsuits, notices, or other legal documents on behalf of the entity. Texas requires every entity to assign a registered agent before it is authorized to conduct business within the state.
For example, suppose you want to start a company. To formally register your business with the state and obtain the benefits of the corporate structure, you must file certain organizational documents including a Certificate of Formation. Within the Certificate of Formation, you must specifically let the state (and anyone who may want to sue you in the future) know the person you are designating as the official contact person for all legal documents to be sent. Therefore, the state and everyone you do business with knows where to send your documents. The state requires every business to designate a registered agent to prevent businesses from claiming that they did not receive a document.
While larger businesses often utilize corporate third-party registered agents such as CT Corp. or InCorp.; small businesses may designate an individual who lives in the state or another entity that is registered to do business within Texas. If the company’s principal place of business is located outside Texas, it must use a registered agent that is located within the state. An attorney or an accountant may also serve as the registered agent in Texas.
All businesses must maintain a registered agent in Texas. Failing to designate or maintain a registered agent subjects an entity to fines or administrative termination by the Secretary of State. If an entity is administratively terminated, it is treated as if it voluntarily decided to wind up its affairs. Thus, the members and directors could lose their corporate shield and can be held personally liable for any debts the business incurs after the termination. Moreover, the corporation cannot sue or defend cases within the state until it is reinstated.
Designating a registered agent is fairly simple but it comes with a lot of responsibility. The registered agent is the first line of defense against lawsuits and can protect you from default judgments.