Simply put, a registered agent acts as the state's means to communicate with a corporation or LLC. On a more technical level, the registered agent fulfills certain legal obligations the state must afford to a corporations or LLC. Because a corporation (and an LLC to a certain extent) is considered a separate entity, it retains certain legal rights with due process as one of its most important. Due process includes the right to be given notice. For this reason, states require a corporation or LLC to provide an agent to facilitate the state's duty to give notice to a corporation or LLC.
The Importance of a Registered Agent
Imagine the consequences of not having a registered agent. How do you give notice to something that only exists on a piece of paper? On a more practical level, how does a state (i.e. Delaware) give notice to a corporation who is merely registered in that state but has all of its business activity done outside the state? The registered agent eliminates these concerns. Any paperwork and declarations from the state, such as annual report and franchise tax forms, is sent directly to the registered agent. Any service of process for any lawsuit or other legal action is also sent to the registered agent.
As a benefit to the corporation or LLC, the registered agent acts as the administrative link with the state. The registered agent is required to forward all documents and notices to the corporation and often provides a service to report whether or not the corporation or LLC is in "Good Standing" with the state. With a corporation potentially conducting business in many different states, the corporation may have a hard time keeping track of legislative changes and report due dates, and so the registered agent becomes a crucial component in navigating through these administrative hurdles.
A corporation or LLC that fails to maintain a registered agent risks losing its legal status within that state as well as incurring penalties. More importantly, failing to maintain a registered agent or having a registered agent fail to perform his or her duties may have catastrophic legal ramifications if by chance the corporation or LLC is sued in the state where it fails to maintain a registered agent.
Generally, states require the registered agent to be a resident of the state, and in cases where the registered agent is another business entity, the business entity must be authorized to conduct business in that state. The registered agent can be a corporate officer or director, or a lawyer/CPA. Some states allow the business entity itself to be the registered agents, but not all states. The registered agent must provide a physical address (no P.O. Box) within the state where there are persons available during normal business hours.
Having a third-party registered agent has its advantages. A corporation or LLC is free to move without having to file (and pay for) a change of address with the state. A third-party registered agent can keep track of all legislative changes and requirements within the state and provide timely notice of any lawsuit or legal action against the corporation or LLC. Along those lines, a third-party registered agent may also prevent any embarrassment from customers and employees by not being served a lawsuit or legal action at the corporate office or principal place of business.