How to Mitigate Risk When Choosing a Registered Agent
Risk management is one of many functions a registered agent (RA) is expected to perform. A reputable RA will work promptly to forward service of process (SOP), and other legal, entity, tax, and official correspondence to clients to ensure action may be taken in a timely manner. RAs also help organizations avoid the risks associated with non-compliant entities – including fines, fees, dissolution, business interruptions, and reputational damage – by filing annual reports and renewing business licenses, registrations and DBAs to keep entities in good standing.
Unfortunately, the RA industry is largely unregulated – which means certain bad actors looking to make a quick profit have quietly infiltrated the market. These opportunists may overcharge, provide low-quality or incomplete services, offer extremely limited insight into how they operate, or – at an extreme – render services under false identities.
The Threats Posed by Dishonest RAs
Wired recently published an investigation into Registered Agents Inc., a shadowy company that routinely incorporates companies under fake names. This practice isn’t new – and is also intentionally leveraged by “oligarchs, criminals and online scammers” to conceal the identities of business owners, according to reporting from The Washington Post and the International Consortium of Investigative Journalists.
But while some may intentionally seek out disreputable RAs, others are inadvertently ensnared in their unethical practices. According to former Registered Agent Inc. employees interviewed by Wired, “customers of Registered Agents Inc. typically aren’t aware that a fake name is used to sign their company’s incorporation documents.”
In many jurisdictions, the legality of incorporating entities under a false identity exists in a gray area – but is something reputable organizations should, quite obviously, avoid. At best, the practice is ethically dubious. At worst, it could irreparably harm your organization’s reputation or potentially land you in hot legal water in the event of an audit or investigation.
RAs who don’t push boundaries to such an extreme can also endanger organizations. Those who fail to forward mail or file reports or renewals in a timely manner can cause organizations to fall out of good standing in the jurisdictions where they operate. This can lead to costly business interruptions, and reputational damage that can impede or halt M&A, scaling and divestment activities.
If your job is to contain risk, it’s important to be aware of the liabilities improperly vetted RAs can expose your organization to – regardless of the egregiousness of their transgressions. If you’re in the market for a new registered agent – that doesn’t make you second guess their dependability – look for the characteristics outlined below.
What to Look for When Vetting RAs
Transparency
The vast majority of RAs offer limited insight into how they operate. And, while this may not necessarily be an indicator of nefariousness, it can make it more challenging to assess their trustworthiness.
To assuage these concerns, search for an RA that offers total transparency – into their business practices, available services and pricing, and billing policies. If an RA provides you with a designated point (or points) of contact and can clearly articulate the processes they use to form new entities and keep existing entities compliant, they are likely one you can rely on.
Visibility
Most traditional, national RAs and smaller, locally-based RAs use manual processes to fulfill business obligations. This approach often leaves clients in the dark. Instead of having visibility into the status of entities or official correspondence, clients simply have to trust that their RA is completing work and forwarding their mail in a timely manner. And when low visibility is paired with limited transparency, it’s difficult to gain or maintain that trust.
Digital RAs, on the other hand, leverage software to complete work – and use a portal to keep clients updated. All official mail is uploaded to the portal upon delivery and the status of entities is updated whenever work is completed. So, in addition to having instant access to all entity-related information, clients can also easily monitor the RA’s work.
Control
There’s no one-size-fits-all approach to maintaining entity compliance. Every organization has unique needs and preferences – and any RA working in your best interest will understand that.
An RA that requires you to cede control of your entities is one that should give you pause. Even if you prefer to take a hands-off approach to entity management, you should still have complete control over what happens to your entities, and when. A reputable RA will give you the option to be as hands on (or off) as you want – and the ability to change your mind at any time.
Contain Compliance Risk with Filejet
Filejet is a digital registered agent that keeps organizations’ legal entities compliant through its combination of cloud-based software and service. In addition to streamlining the delivery of SOPs and other critical mail, Filejet automates the filing of all U.S. and international annual reports, business registrations, license and DBA renewals, and more.
All business is conducted through Filejet’s highly transparent and easy-to-navigate portal. Users have instant insight into the status of entities and work done and can choose their level of involvement – and maintain confidence that risks surrounding entity compliance are controlled.
