What is the Downside of a Lawyer Serving as a Delaware Registered Agent?
By statute, companies incorporated in Delaware must have a Registered Agent appointed at all times. Often lawyers are instrumental in both forming companies with the state of incorporation and preparing internal documents setting forth ownership and management provisions. In addition to choosing the type of entity and state of formation, a Registered Agent must also be selected prior to filing with the secretary of state. It is tempting for a lawyer to sign-up to be the Registered Agent at the time of filing, but a lawyer may not want the responsibilities of being a Registered Agent.
To act as Registered Agent, the lawyer can charge a small recurring fee for the additional services. It may enhance an opportunity to be engaged to defend an action should the company be sued. Nevertheless, it may not be advisable, should the lawyer not be familiar and prepared to fulfill all registered agent duties at all times going forward. Being a Registered Agent with more than 50 clients requires the lawyers comply with regulations governing Commercial Registered Agents. Even with less than 50 Registered Agent clients, the responsibility of being appointed the Registered Agent can be a nuisance and may result in oversights.
Delaware lawyers should know the risks before they assume the duty of being appointed as a client’s Registered Agent. Delaware lawyers have ethical duties to clients that may expose their law firms to unwanted claims from clients if the law firm neglects to perform its statutory duty to forward communications to companies. The Registered Agent should: (i) forward service of process, (ii) ensure clients file their annual reports, (iii) file documents promptly and accurately, and (iv) maintain up-to-date contact information.
The lawyer appointed as agent runs a further risk of receiving a subpoena for information not protected by the attorney-client privilege. Additionally, unwanted communications often persist many years after the company is dissolved, even if the company is no longer a client. Hiring a Delaware Commercial Registered Agent is a small price to pay to avoid the nuisance of being an intermediary for routine communications.
The law firm appointed as Registered Agent must be prepared to receive and forward service of process for the client, no matter who is working the reception desk of the law firm. The law firm should be diligent about promptly forwarding communications to avoid a default judgement should a lawsuit not be answered in time. Inconveniences to the law firm include increases in junk mail and unwanted phone calls to the law firm listed as Registered Agent. Moreover, if the servicing lawyer switches firms, the Registered Agent address may not get updated causing problems of continuity of client relationships and quality of service.
What are the benefits of appointing a Commercial Delaware Registered Agent? Generally, a Registered Agent serves as a third-party liaison with the state in which a business is incorporated, formed, or qualified to do business. This duty requires maintaining a business address within the state. It is the Registered Agent’s job to receive and forward state notices and legal documents to the companies contracting it to act as agent. Some reputable Registered Agents go above and
beyond the minimum statutory requirements and send multiple reminder notices to businesses of their annual filing and payment due dates by email if the business does not promptly file in response to the paper notice. Reminders can help avoid stiff penalties and loss of good standing.
Experienced Commercial Delaware Registered Agents are knowledgeable about regulations and processes to keep your client’s business compliant with the state’s periodic franchise tax payment and annual report filing requirements. Aside from helping to keep entities in good standing, Commercial Delaware Registered Agents can be a resource for various filing templates and filing questions.
Although it may be tempting to be appointed Delaware Registered Agent for your client, the small fee to hire a reputable third party is worth the peace of mind to be free of administrative burdens and statutory duties.
About the author
John LegarÃ© Williams, Esquire practices business law through The Williams Law Firm, P.A. (www.TrustWilliams.com). He is also President of Agents and Corporations, Inc. (www.IncNow.com), a family owned and operated incorporation service that provides filing and registered agent services in Delaware to business owners from around the world. Nationally, Mr. Williams is a frequent speaker nationally on the topic of Delaware LLCs and in particular the Delaware Series LLC, the most cutting-edge entity on the market.