Real estate investors who use an LLC for business operations may wonder if they need a registered agent in every state where they have properties or transact business.
Sometimes, entrepreneurs choose a state other than their residence for forming an LLC, and different jurisdictions may have different rules about registered agents. Here is what the law says about registered agents and options you should know about.
Where Do You Need A Registered Agent?
The state laws are clear on where you should have a registered agent:
- If you have formed an LLC in your home state and own only local properties, you need a registered agent only in the home state. You also can be your own registered agent—more on this later.
- When you are doing business in multiple states, you may need to register your LLC in each state where it has significant business operations.
- If the LLC is registered in any state other than your home state, you will need a registered agent in the state of registration and in other states where you operate.
Registered Agent In Your Home State
Those who form an LLC in their home state and invest only in local properties will need to have a registered agent only in the home state. In this situation, many real estate investors consider becoming their own registered agents, saving the annual service fees.
While becoming your own registered agent in your home state might seem a no-brainer, there are still things to consider. First, the registered agent must physically reside in the state of business formation. Secondly, the registered agent should be able to accept service of legal papers during regular business hours.
He or she is also responsible for all legal and tax filings. Last but not the least, the registered agent should disclose his or her address in all company documents, which may raise privacy concerns. Meanwhile, there are other options for a registered agent in your home state, as we'll see.
Registered Agents Where You Are Doing Business
Whether you have a traditional LLC with properties across several states or a Series LLC, you need to have a registered agent in every state where your company is doing business. Although it may sound clear at first sight, the tricky part of this requirement is what is considered as "doing business" in the state.
For example, the Texas Business Organizations Code doesn't provide any clarification of the meaning of "transacting business." Thus entrepreneurs and lawyers are left with a non-exhaustive list of what is not considered a business transaction. The confusion is similar in other states.
Meanwhile, those real estate investors who buy properties in other states and then flip them are considered as "doing business" in these states. Remember, you are required to have an LLC registered agent in each such state.
Registered Agents For Out-of-State LLCs
Some investors register their LLCs in business-friendly states such as Delaware, Nevada, Wyoming or Texas even if they reside in other states.
To do this, you'll need a registered agent at the place of LLC registration—you cannot even file the initial paperwork for your LLC without it. You should also have a registered agent in all other states where you conduct business.
What Happens If You Fail To Appoint A Registered Agent?
As you already know, there is no way to skip appointing a registered agent when forming an LLC. However, when buying or selling local properties in other states, you may be tempted to delay or totally skip appointing a registered agent in the state where you are now doing business.
This could lead to legal expenses, loss of limited liability protection, and even criminal charges. In Texas, a failure to appoint or maintain a registered agent (and registered office) may result in the closure of the business along with other liabilities.
The best solution is to have a registered agent immediately before your company initiates any business transaction in any state.
Registered Agent Services
As was already mentioned, you can be your own registered agent in your home state if you are comfortable with tax and legal filings, if you are ready to disclose your address to the public in company documents, and if you can receive legal papers during business hours (even when on vacation or sick).
If the above doesn't sound like a good fit, another option would be to hire a company offering registered agent services for a small fee, ranging from $45 to $75 per year. These companies offer a standard set of services, and many of them are present in multiple states.
Another alternative would be to hire a law firm offering registered agent services. A professional lawyer would not only act as your registered agent but will be able to assist with other aspects of company formation and compliance.
Now you know that not having a registered agent in the state where you do business can lead to high penalties and injunctions and even criminal prosecution.
There are numerous companies offering the services of professional registration agents for a small annual fee. It is even better to involve a professional attorney as your registered agent—he or she can assist with whatever legal issues may arise and ensure compliance across the board.