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.
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.