do-ecommerce-businesses-need-to-have-a-registered-agent

Updated 8.13.2019 to provide more information about economic nexus and registered agents.

More than 41 states now have laws requiring out-of-state sellers to collect and remit sales tax. That means more businesses than ever, especially ecommerce businesses, need to register to do business in other states — and may need the services of a registered agent.

You’re not alone if you’ve never heard of a registered agent. But if you’ve recently developed a sales tax collection obligation in one or more new states, you probably need to retain one. Read on to learn more about this mandatory point person.

What’s a registered agent?

Simply put, a registered agent (RA) is a legal representative and contact in a state for a corporation, limited liability corporation (LLC), or limited partnership (LP). You’re generally required to have a registered agent in your home state and in any other state where you’re registered to do business. Having a registered agent in a state ensures you can be served important business, legal, or tax documents.

Although the Georgia Secretary of State calls the registered agent “the ‘mailbox’ for the corporation,” simply renting a post office box in another state under the name “My Company’s Registered Agent” would not be sufficient. A registered agent must be an individual or business entity that’s in the state and available during normal businesses hours.

Some states use the term commercial registered agent or statutory agent rather than “registered agent.”

Why do you need a registered agent?

States require you to have a registered agent to ensure you can be served papers. While many documents can be sent via mail or email, some documents still need to be served in person.

The larger your business, the more likely you are to be served official documents. These may be correspondences from the state, like annual reports, or something more ominous, like a legal summons.

If you’re required to have a registered agent in a state, you’re required to continually maintain it. Failure to do so in some states can lead to monetary penalties or even revocation of your right to do business in the state.

Do you need a registered agent if you have economic nexus?

For the most part, an out-of-state business must have a registered agent only if that business is required to register with the Secretary of State to obtain a Foreign Qualification (Certificate of Authority, or CoA); a CoA is generally only required for businesses with physical presence nexus.

An out-of-state business that has economic nexus but no physical presence nexus with a state can usually obtain a sales tax license from the state department of revenue without obtaining a CoA from the Secretary of State. Thus, a true remote seller typically doesn't need an RA.

However, an out-of-state business that has economic nexus as well as physical presence nexus through inventory stored in the state for sale, trade show attendance, or another connection may not qualify for the economic nexus exception.

State sales tax registration requirements are subject to change, as is everything related to sales tax. To ensure you're in compliance, it's always best to check with a trusted tax advisor or the state tax authority.

Can I be my own registered agent?

It’s generally permitted to act as your own RA in your home state and doing so may save you some money. However, there are good reasons not to act as your own registered agent.

For one, it’s hard to go on vacation or stay home sick if you’re the only person who can legal receive certain legal documents during normal work hours.

It’s also hard to keep a summons private: You probably wouldn’t want everyone in your office to know you’ve received a summons from a creditor. Whispers at the water cooler and whatnot.

Finally, it’s impossible to act as your own RA in states where you don’t have a physical presence.

How to choose a registered agent

Once you take yourself out of the equation, you’re left with deciding between an individual or a third-party entity.

Asking an individual

A trusted employee or even friend or family member can serve as your registered agent in your home state. Yet any individual will come with the same challenges you’d face if you acted as your own RA: A registered agent needs to be available every day during normal business hours; no more vacations or staying home when ill.

There’s also the issue of confidentiality. The kind of papers that necessitate the services of an RA are typically sensitive in nature. You want to choose who’s privy to that information wisely.

Finally, since you generally need an RA in all states where you’re registered to do business, you probably won’t be able to rely on just one person. You’ll need to recruit additional individuals as your business expands into other states. Can you imagine having up to 50 different registered agents?

Hiring a third party

There are businesses in every state that provide RA services. If you’re not sure where to start a search for one, Secretary of State or similar websites (links below) generally provide a list of professional registered agents.

Some companies offer registered agent services in multiple states, or even nationwide. The main benefit of working with such an agency is obvious: You only need to establish and maintain one working relationship. When you expand into a new state, you simply let them know.

Hiring a third party will cost you, of course, but perhaps less than you think. Using a registered agent agency may be less expensive than paying your attorney or accountant to be your RA, and an agency may give you a break if you use their services in multiple states.

How a registered agent works with Avalara

The requirement to have a registered agent in a state is separate and distinct from the requirement to register to collect sales and use tax. However, in some states, businesses may have to register with the Secretary of State or another entity before obtaining a sales tax permit or license.

Avalara Licensing can help you register to collect sales and use tax in any state, county, city, or other jurisdiction in the United States. Avalara doesn’t provide registered agent services.

Want to know more about registered agent requirements? It’s not always easy to find information, but the links provided below can help get you started.

Need to register to do business in one or more state? Avalara Licensing can help.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.

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