What You Should Know About Registered Agents for Your Out-of-State LLC

by | BiggerPockets.com

This article does not constitute legal advice. We recommend you seek the counsel of an attorney familiar with your specific situation and market to ensure you make the best decisions within your real estate business.

It’s not at all uncommon for real estate investors to form LLCs to protect their assets and streamline their business operations. But not everyone lives in a state that is friendly to small businesses. Savvy investors often get around the limits of their home state laws by forming an LLC in a state that is more favorable to LLCs. But did you know that if you do this, you are legally obligated to have a registered agent? Read on to learn what a registered agent is, what role they play in your business, and what your options for fulfilling this obligation are.

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What Is a Registered Agent?

You can think of your registered agent as the face of your LLC. This is the person who will be the go-to for business matters in the state where your company is formed. He or she is also the person accountable when it comes to matters of law. Your agent will be legally responsible for all of your LLC’s legal and tax documents.

Related: The Pros & Cons of Using a New LLC for Every Property Purchase

So, let’s say you live in North Carolina, but decided to form your LLC in Delaware for the many judicial, operational, and tax advantages provided there. To stay on the right side of the law, you are going to need somebody (and it can be literally anybody) who is a resident of Delaware to assist you. This person is your registered agent, and you will be trusting him/her to take on the responsibilities mentioned above.

Exceptions to this legal requirement do exist, but aren’t the norm. For instance, some states will allow the LLC itself to serve as its own registered agent. In these cases, the LLC is treated like its own person and is considered a resident based on its business presence in the state alone. In legalese, this concept is known as “corporate personhood.” Corporate personhood means that in the United States, an entity like an LLC can have the same rights and responsibilities as an actual human being.

Another exception to the registered agent requirement is if you have a physical address in the state in which your LLC is formed. And for all my fellow loophole lovers out there, beware of getting slippery with this requirement. Don’t think you can satisfy this by springing $20 for a P.O. box. It has to be a real deal property to count. We can’t blame anyone for wanting to try that, but all you’ll get is points for creativity. A P.O. box does not a registered agent make.

Can I Be My Own Registered Agent?

Yes, you sure can! But, of course, there are some details you’ll need to be clear on. First of all, if you plan to go this route, you need to be sure that you can satisfy all of the requirements listed above. Residency can get tricky if you split time between states. Next, but equally importantly, be sure you’re competent to do the job. Remember, the registered agent is legally responsible for all legal correspondence and tax obligations. If you are a lawyer or CPA, then you may well be best served by being your own registered agent. However, if you have any doubt about your ability to know and satisfy your legal requirements, it’s time to ask for help.

And, in fact, there can be some benefits to having another person, ideally a professional, serve as your registered agent. The most obvious of these is that it’s not all on you—you won’t screw up your business because you missed a piece of mail while down with the flu. But there are other benefits as well. Perhaps the most important of these is that you will receive some liability protection by designating another party as your registered agent. That person then assumes the legal liability, and this confers asset protection benefits back to you.

If you’re on top of your real estate game, you’ve probably already assembled a dream team of an attorney, CPA, and deal maker. So you may be thinking the last thing you want to do is hire yet another person. But hiring a registered agent is actually surprisingly cheap. In fact, $45-$95 a year will get the job done. Figure in the benefits mentioned above, and the cost is absolutely worth it.

Related: 3 Benefits of Holding Your Properties in an LLC

What Happens if I Don’t Get a Registered Agent?

If you don’t get an agent, you’re going to have a bad time. “Bad time” here means anything from brutal fines to exclusion from the court system, which will make it very difficult (and very illegal) to run your business.

And it can get worse than that.  Some states will go as far as filing criminal charges if they bust you operating out-of-state without a registered agent. So, you definitely want to spring the $45-$95. You know, unless you like the look of black-and-white stripes and don’t mind having a cellmate named “Big D.” The small expense of hiring an agent is absolutely nothing compared to the cost of dealing with the fresh legal hell that awaits you if you fail to register an agent. To learn more, check out my video on the importance of having a registered agent for each of your LLCs.

That’s all for our primer on registered agents for your LLC. If you’re still lost, or would like to add any additional points to the conversation, leave any questions or comments below. Thanks for reading, and I hope you found this information helpful. Go forth and form your LLC!

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About Author

Scott Smith

Scott Smith helps clients nationally and internationally from his office in Austin, Texas. With over 5 years experience in the litigation, Scott works on proactively building defense in anticipation of future lawsuits for real estate investors. Scott is one of the few attorneys in the nation that structures companies for maximum protection with minimum taxes.

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7 Comments

    • William Morrison

      Go to your state government site.
      I have several and in several states. Not just LLCs but any business entity.
      I have found they all have pretty good information.

      I am familiar with North Carolina, right next to you.

      The basic requirement is to have a some one available in the state during normal business hours, generally five days a week. Some states defined normal business hours some don’t.

      The main purpose they give and each state I’ve looked up, is that it provides a place for your LLC or business to be served papers, ie any legal issues. None that I know of provide any service beyond receiving the papers and contacting the Manager of the LLC.
      It is the responsibility of the entity to keep contact information up to date with the Registered Agent.

      You being out of the office is not acceptable, someone has to be there. The address is public and wouldn’t look good if someone came more than once.
      If you are a single employee business you may still need one.

      Even if you have an LLC registered outside the state but operate in that state, including rental property. You still have to register with the state. I think the term is foreign entity.

      They are not much more than a Mail Boxes Etc or UPS Store.

      I was paying my annual bill for one today. It’s $49 per year. When I registered each of my LLCs with each state I had to tell them who it is and I have to tell them if it changes. The company I use starts sending me an email bill about 3 months out (grin). And each one reminded me in a nice way that they are required to notify the state if I fail to re-up.
      I think my annual filing with each state asks me if I have changed Registered Agents.

    • Scott Smith

      Hi Karen,
      William is correct that your state’s site is a good starting point. Your attorney can also be s good resource and may provide an RA service as well (assuming they’re a real estate attorney).

      Where is your out of state LLC based? This will actually influence your course of action as much as your home state. Let me know if you have more questions.

    • Scott Smith

      Exactly! For many investors, this expense is well worth it. People often forget to figure in the value of their time when deciding whether to hire a pro. But if you figure out how much of your time is worth $75-100 (cost for a RA), and figure that you can’t do the required tasks for under that amount, then hiring a pro is a good idea. It sounds like this is exactly what you did, and that was a smart move. Glad it’s working out for you.

      If you have an attorney, you can ask about their RA service (if they provide one) and perhaps save more. But with your current setup, sounds like you have what you need. If it’s not broken, no need to fix. Thanks for sharing!

  1. Bo Wagner

    Check with your CPA as to what is best option for the LLC. Typically it seems wise to have an LLC “in” the State of your rental property; perhaps the only member of that LLC could be your ‘home turf’ LLC but again, check with your CPA.

    At the end of the day, the LLC is a great extra layer between your and someone trying to sue you. With that being said, a crafty litigator may eventually figure out how to find you… (but I’m a ‘good guy’–just a transactional attorney) : )

    • Scott Smith

      Ha! True, a CPA is always a great person to have on any real estate dream team. There are ways to beef up protection, such as with a Series LLC or anonymous trust structure. Californian and Canadian investors will have special tax concerns and may benefit more from DSTs or LPs, respectively.

      One of the “good guys,” I love it! As with any competent legal answer, the best structure for a given investor absolutely depends on their situations. The best resource is going to be the team of professionals entrusted to handle the situation. An attorney and CPA are the most essential, in my humble opinion. But I write these articles in part so people can be informed with the questions they ask their professionals. Personally, I like when clients ask a lot of questions and have done their homework n their options.

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