Using a Friend or Relative as a Registered Agent
While it's true that you can save money on registered agent fees by using a friend or relative, it's not necessarily a good idea. Although you might disappoint Uncle Harry, there are lots of great reasons why using a friend or relative is a registered agent is a disaster waiting to happen.
From the state's perspective, your registered agent is the official face of your corporation.
That's why it's surprising that some companies use friends or relatives as registered agents. The rationale is that since all a registered agent does is receive official documents in the mail, it's not worth outsourcing the task to someone who charges a fee for the service.
That line of thinking is both flawed and dangerous. Here's the issue: A registered agent plays a necessary role in a corporation. If the person who has been designated as your company's registered agent isn't prepared for the responsibility it can have devastating consequences on both them and your business.
Here's a small sampling of the many reasons why using a friend or relative as a registered agent is never a good idea.
- Lack of expertise. The person you designate as your registered agent doesn't necessarily need a degree from Wharton business school. However, he should possess a certain amount of knowledge about corporations and state requirements. Most friends and family members should be disqualified as registered agents for this reason alone.
- Junk mail. If you truly love your friends and family members you won't ask them to be your company's registered agent. As a matter of law, registered agents' addresses are public record and that means their mailboxes are regularly overflowing with junk mail.
- Timely follow-through. When a registered agent receives important correspondence, he needs to bring it to the attention of the appropriate corporate officer ASAP. Friends and family members are often unprepared for this level of responsibility and important documents sometimes fall through the cracks.
- Appearances. Registered agents are required to receive Service of Process documents that initiate lawsuits. These documents are often served by law enforcement. If your friends and family members aren't comfortable having law enforcement officers show up at their home or business on a regular basis, they might not be the best choice for your registered agent.
- Hard feelings. For a variety of reasons, you might need to occasionally change registered agents. More often than not, your family and friends will take a change in their status as a personal rejection. For the sake of your relationships and your business, it's just easier to avoid designating friends and family as registered agents in the first place.
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