Category: Starting a Business

When starting a new business, choosing an entity type is one of the most important decisions you must make. Many entrepreneurs are torn between a limited liability company (LLC) vs corporation. While these entities are similar in many ways, they have profound differences that should inform what you choose.

What Is a Limited Liability Company?

A limited liability company (LLC) is a type of business entity that protects its owners from personal liability. It is a hybrid business structure that blends the features of a partnership and corporation.

The owners enjoy limited liability just like corporation owners and receive taxable dividends just like in a partnership. Some of the most notable limited liability companies include Johnson & Johnson, Nike, and PepsiCo inc.

• No restriction in the number of owners and owners enjoy limited liability
• Pass-through taxation and flexibility in taxation
• Easy to operate plus flexible management options

• Compared to other forms of business ownership such as a partnership or sole proprietorship, it’s costlier to form and maintain an LLC
• Obtaining ownership interest might not be easy

What Is a Corporation?

A corporation is a business entity formed by one or more people with a shared goal. The most common types of corporations include S corporations, B corporations, C corporations, non-profit corporations, and closed corporations.

Generally, corporations are legal entities distinct and separate from their owners. The entity can borrow money, enter contracts, hire employees, pay taxes, and even own assets with zero attachment to the stakeholders. The majority of large businesses, such as Toyota Motors and CocaCola Co., are corporations.

• Stakeholders are not liable for corporate debts and legal obligations
• Buying, selling, or transfer of ownership is straightforward
• Easier access to capital through stock trading
• Established power structure–Shareholders, chief executive officers, and directors have well-established responsibilities
• S corporations are not subject to double taxation

• Complex application process
• Excessive bureaucracy, and rigid formalities
• C-corps are subject to double taxation
• It can be costly to form, run, and maintain a corporation

LLC vs. Corporation: The Differences

LLCs and corporations are alike in many ways. At the same time, they have major differences, especially in terms of formation, governance, ownership, and taxation. This comparison chart summarizes the key differences which we will discuss in detail.

LLC

S Corporation

C Corporation

Limited liability

Yes

Yes

Yes

Flexible Management Style

Yes

No

No

Eligibility Restrictions

No

Yes

No

Limitless Shareholders

Yes

No

Yes

Capital Structure Restrictions

No

Yes

No

Single Taxation

Yes

Yes

No

Double taxation

No

No

Yes

Entity can go Public

No

Yes

Yes

Annual Reports

Not Required

Yes

Yes

Annual Shareholder Meeting

Not Required

Yes

Yes

Can Raise Funds From Investors

Yes

Yes

Yes

Directors are Public Record

No

Yes

Yes

Formation

There are strict formal requirements that must be fulfilled when forming both LLCs and corporations. Both entities must fulfill state maintenance and reporting requirements to ensure limited liability protection. However, corporations have more annual obligations. For example, they must hold annual shareholder meetings.

Moreover, corporations must file annual reports to keep the secretary of state updated about any changes or actions enacted through votes by the board of directors. LLCs don’t have strict record-keeping requirements, and some states, such as Ohio, don’t make it mandatory for such entities to file yearly reports with the secretary of state.   

Ownership

To own a corporation, you have to buy a share or a percentage of the business stock. Shareholders are entitled to dividends and are not actively required to take part in running the business. Also, they can sell and buy shares as they wish.

On the other hand, LLCs are owned by members who set the rules pertaining to the requirements for membership and transfer of ownership interest. Depending on the set operating agreement, all members could receive equal profits and losses regardless of their financial contribution to the business. Again, all members own the business and participate in its everyday operations.

Transfer of Ownership

With corporations, ownership is wholly based on the shares owned. If a shareholder wants a stake in the company, they simply need to sell or transfer their stock to a willing buyer. 

LLCs do not enjoy the same freedom. A member must draft a sales agreement with a new buyer and might have to record the sale with the state’s Business Registrations Agency. While there are no significant restrictions, a transfer process can be laborious and time-consuming.

Governance and Management Structure

All members in an LLC own the business and participate in its everyday operations. There’s no power hierarchy, and members can play specific management roles or appoint others to run the business. Generally, LLCs are member-managed, and the management structure is less formal.

On the other hand, corporations have a rigid governance structure with the board of directors at the top of the power hierarchy. Shareholders are at the bottom of the power chain. While they have a right to vote for the board of directors and officers, they do not make any business decisions unless they are pre-approved.

Tax Implications

LLCs and corporations are poles apart regarding their tax obligations. LLCs are usually taxed as pass-through entities unless the members choose to have them treated as C corporations. Pass-through entities or S corporations allow owners to pay personal income tax once they receive profits without subjecting them to corporate tax.

C corporations are not immune to double taxation. This means that the business pays taxes as an entity, and owners pay personal income tax after receiving income.

LLC vs. Corporation: What Are the Similarities?

Both of these entities provide personal assets protection for owners and require registration through a state-accredited business filing agency. Also, both entities enjoy perpetual existence even if a shareholder or owner passes on or resigns.

Perpetual Existence

LLCs with two or more members and corporate entities are not at threat of extinction if a member or stakeholder can no longer hold their position. As long as the business owners do not file Articles of Dissolution or set a dissolution date in the formation documents, the entity will continue to run indefinitely.

Business Registration

As expected, you must file formation paperwork with a state-accredited filing agency. It is also mandatory to obtain licenses and permits before kickstarting business operations. Read about the steps involved in registering a business here.

Limited Liability Protection

Both LLCs and Corporations provide asset protection for owners. This means that they are not personally liable for liabilities and debts incurred by the business. However, in some cases, limited liability protection may not prevail, for instance, when an owner personally guarantees a debt or commits a crime.

Bottom Line on LLC vs Corporation

So, what should you go for between an LLC and a corporation? The right answer will depend on the financial, operational, and legal implications you are ready to bear. Think of the business entity as the foundation of your venture that will set the rules you must follow. Because an ounce of prevention is worth a pound of cure, it is perfectly rational to consult a business lawyer before making your final choice.

Organizations that qualify as a 501c3 nonprofit can enjoy various tax-related benefits. Although there are different types of 501c organizations, ranging from 501c1 to 501c29, 501c3 nonprofits are unique because their donations are tax deductible. Since they are also exempt from federal income tax, 501c3 organizations are the most sought after nonprofit status. 

What is a 501c3 Nonprofit Organization?

A 501c3 nonprofit is an organization that is exempt from federal income tax. More specifically, section 501c3 is a part of the U.S. Internal Revenue Code (IRC) and a distinct tax category for nonprofit organizations. This means that 501c3s don’t need to pay any taxes on the money they make.

Although the Internal Revenue Service (IRS) acknowledges over 30 types of nonprofit organizations, only 501c3 qualified organizations can claim tax deductibles on donations. Most organizations that qualify for 501c3 nonprofit status are charitable organizations, private foundations, and churches and religious organizations. 

Unlike corporations and limited liability companies (LLCs), nonprofit organizations don’t seek to make a profit. Typically, 501c3s want to make money in order to further a social cause or provide a public benefit. After a nonprofit organization pays off its office expenses, salaries, and so forth, it uses the excess money for the specific cause it supports. 

Since 501c3 nonprofits don’t pay taxes, the nonprofit maximizes the amount of money it uses towards its specific social cause. There are 1,919,926 nonprofit organizations in the United States with churches and religious organizations as well as schools and educational institutions leading the pack.

How Does a 501c3 Nonprofit Work?

To qualify as a 501c3 nonprofit by the IRS, an organization must exist exclusively for one or more of the following purposes:

• Charitable
• Religious
• Educational
• Scientific
• Literary
• Testing for public safety
• Fostering national or international amateur sports competition
• Preventing cruelty to children or animals

If the nonprofit doesn’t exist for one of the purposes above, it will not qualify for 501c3 status.

The IRS also describes what “charitable” activities include:

• Providing relief for the poor, distressed, and underprivileged
• Advancing religion
• Advancing science or education
• Erecting or maintaining public buildings, monuments, or works
• Lessening the burden of governments
• Lessening neighborhood tensions
• Eliminating prejudice and discrimination
• Defending human and civil rights secured by law
• Combatting community deterioration
• Addressing juvenile delinquency

A common misconception about nonprofits is that they are only run by volunteers. However, most 501c3s have salaried staff that work for the organization. But nonprofits may use volunteers to perform some of the nonprofit services under the direction of paid staff.

Types of Different 501c3 Nonprofit Organizations

The organizations that qualify under section 501c3 are classified into two categories: public charities and private foundations. The difference between them is how they receive financial assistance.

Public Charity

Public charities receive most of their revenue or income from the government or the general public. To qualify as a public charity, the nonprofit must receive at least one-third of its income from public donations. These include donations from corporations, individuals, and other nonprofit organizations. 

Individuals who donate to a public charity qualify for certain tax deductions that will lower their taxable income. Usually, individuals can claim a deduction of up to 60% of their adjusted gross income (AGI). Corporations can claim up to 10% when filing taxes. 

Private Foundation

Individuals, families, or corporations are usually the ones who hold private foundations. This type of 501c3 nonprofit receives most of its income from a small number of donors. Furthermore, private foundations adhere to stricter rules and obligations than public charities. All 501c3 nonprofits are automatically considered a private foundation unless they can prove to the IRS that they meet the guidelines of a public charity. 

What are the 501c3 Nonprofit Requirements?

If you’re considering starting a 501c3 nonprofit organization, it’s important to understand the requirements.There are specific rules and regulations a nonprofit must follow to maintain its status. 

The 501c3 nonprofit requirements include:

• It can only be organized and operated for exempt purposes
• It’s forbidden from using its activities to influence legislation in a substantial way
• It cannot be organized and operated for any personal or private interests
• It can make profits, but all profits must go towards charitable purposes
• Staff employed by the nonprofit must be paid “reasonable compensation” based on the fair market value that the job function requires
• It’s required to remain true to its founding purpose
• It must withhold federal income tax from its employee’s paychecks and pay Social Security and Medicare taxes

After an organization is considered a 501c3, the designation remains for as long as the organization exists unless the IRS revokes it. The IRS can revoke the 501c3 designation if the organization fails to follow the nonprofit requirements listed above.

Bylaws of a 501c3 Nonprofit

Similar to regular corporations, 501c3 nonprofit organizations have a set of bylaws and a number of directors and officers. Nonprofit bylaws are the rules that determine how a 501c3 nonprofit will be governed and run. You can view it as a constitution for the nonprofit organization. 

It helps clarify the rules and priorities of everyone involved in the nonprofit. The directors of a 501c3 are responsible for overseeing the organization’s operations. The nonprofit’s board of directors is responsible for management level hirings, such as officers and managers. 

The officers of a nonprofit, such as the president or secretary, are individuals with responsibilities and the authority to execute based on their job description.

Advantages and Disadvantages of a 501c3 Nonprofit

The primary advantage of a 501c3 nonprofit is that it’s exempt from paying federal income and unemployment taxes. Furthermore, patrons who donate to a 501c3 can claim a tax deduction for their contributions. 

501c3 organizations are also eligible to receive government and private grants. However, the organization needs to have a mission that aligns with the purpose of the grant and a need for the funds. Another advantage of 501c3s is that they frequently receive discounts from retailers, food and supplies from other nonprofit organizations when needed, and free press from public service announcements. 

On the other hand, once an organization is officially a 501c3 nonprofit, it no longer belongs to the founder. Instead, it becomes a mission-oriented organization that belongs to the public. Since the organization serves the public, it must operate with complete transparency.

Bottom Line on 501c3 Nonprofit Organizations

501c3 nonprofits are organizations with a distinct mission and cause. The majority of people know them as charities and churches, but private foundations can also be 501c3 nonprofits. As long as they qualify under section 501c3 by the IRS, the organization receives favorable tax treatment and is exempt from federal income and unemployment taxes.

Business licenses and permits grant you the right to legally operate your business in the U.S. However, there are various types of business licenses which are issued by federal, state, and local agencies. Learn which business licenses you need and how to get a business license.

How To Get a Business License

Each business license type has its own set of application requirements. Still, there is a general process which you need to complete no matter what kind of license you are applying for. Follow the steps below to get the right licenses for your business.

How To Get a Business License in 5 Steps

Step 1: Find Out What Business Licenses You Need

Learn what licenses & permits you need based on your business structure, location & industry type

Step 2: Gather License Requirements

Collect all the necessary documents & requirements

Step 3: Submit Your License Application

Fill out and submit your application for each business license type

Step 4: Wait for Approval

Submit missing requirements (if any) & follow up on the approval of your application

Step 5: Maintain Your Business Licenses

Renew your business licenses & permits before they expire

Step 1: Find Out What Business Licenses You Need

First of all, discover which kinds of licenses are appropriate for the business you are establishing, based on the following factors:

• Business Structure: The structure type which you select when you start your business will determine your registration requirements. Some popular business structures are sole proprietorship, partnership, corporation, and limited liability company (LLC).
• Business Location: The state, county, and city where you are planning to set up your business will have an impact on which local, state, and federal regulations are applicable to you.
• Industry Type: Depending on the industry you are part of, you may need special licenses and permits to prove that you and your team are qualified to sell particular products or provide certain professional services.

Figure out the types of business licenses and permits you need by conducting research. You can explore the websites of government agencies to find useful information and download forms. In case you have questions regarding the application process, you may contact the agencies directly via phone, email, or contact form. On top of this, you can also check out government websites for helpful tips on how to start your business.

Step 2: Gather License Requirements

Collect all the essential documents and meet all the necessary requirements before you apply for a business license. While the exact paperwork may vary depending on the license types you need, here are some common requirements for most licenses:

• Business description, plans, and location overview
• Sales tax permit and other tax documents
• Corporate records
• Ownership and management documents
• Filing fees

You may also be required to provide other requirements if you belong to some business industries:

• Proof of professional qualifications or training credentials for you and key members of your team
• Financial statements
• Insurance records
• Surety bonds

Step 3: Submit Your License Application

Apply for licenses and permits with the appropriate government agencies. Fill out and submit an application form for each business license you are pursuing. Carefully read and follow the instructions since every form has its own prerequisites. Although you can submit most forms online, some forms should be sent via mail or fax. Plus, certain forms must be notarized or signed by several parties.

Step 4: Wait for Approval

Stand by while your license application is still pending since the waiting period can vary. While some agencies approve business licenses right away, others could take several weeks or even months to grant approval. Feel free to reach out to the agency to follow up on your approval status after you have waited for a reasonable period of time. In case an agency contacts you regarding your incomplete application, send the requirements you lack immediately. After all, missing prerequisites can cause delays in the approval process.

Step 5: Maintain Your Business Licenses

Once you successfully gain your business licenses and permits, make sure to maintain each one so you can keep operating your business. Most licenses are only valid for a set period of time, which is why you need to renew them before they expire. Fulfill all the renewal requirements so you can continue to be authorized to run your business.

What Are the Types of Business Licenses

There are different types of business licenses and permits that you can apply for, depending on the kind of business you are setting up. Discover what these license types are and whom they are recommended for. Find out where and how to register each license and how much the application fees typically cost.

1. General Business License

A general business license is a government document that gives you permission to start a business in a certain jurisdiction. In general, it is commonly issued in the form of a tax registration certificate. You need to apply for a general business license with the city, county, or state agency that is responsible for business registrations. Submit the license application form, fees, and other requirements to get this license.

Recommended For: Most business owners in the U.S.

Estimated Fee: Approximately $50 or higher. Exact amount depends on the state, county, or city.

2. DBA License

The “doing business as” (DBA) license allows you to operate your business under a different brand name than your legal business name. While your business name is your personal name by default if you establish a sole proprietorship or partnership, you have the option of selecting a fictitious or trade name to rebrand your business.

You can register your DBA name with the county clerk’s office or the state government. In addition to this, certain states require DBA name filings to be made public to protect the interests of consumers. Take note that you don’t need to file a DBA if you are operating under your own name and if you own an LLC or corporation with a registered business name.

Recommended For: Business owners who wish to operate a sole proprietorship or partnership under a trade name

Estimated Fee: Ranging from around $5 to $100. Exact amount depends on the county or state.

3. Seller’s Permit

The seller’s permit is a kind of business license that grants you authority to collect sales tax on the taxable products and services you offer to customers. Once you acquire a seller’s permit, you are responsible for remitting the taxes you collected to the state. You must submit an application to your state’s Department of Revenue to get a seller’s permit. Take note that five states do not impose sales tax, including Alaska, Montana, Delaware, Oregon, and New Hampshire.

Recommended For: Business owners who provide taxable products and services to consumers

Estimated Fee: Free in most states. Ranging from around $12 to $100 in some states.

4. Federal Business License

The federal business license gives you permission to run a business which involves activities regulated by a federal agency. You should get a federal business license if your business is related to agriculture, broadcasting, investment consultancy, alcohol, and meat product preparation.

Government agencies that issue federal business licenses include the U.S. Department of Agriculture (USDA), Federal Communications Commission (FCC), Securities and Exchange Commission (SEC), Alcohol and Tobacco Tax and Trade Bureau (TTB), and U.S. Food and Drug Administration (FDA). Each agency has its own prerequisites so you must contact the relevant agency to discover the requirements for your business.

Recommended For: Business owners who belong to certain industries, such as meat product preparation, alcohol, investment, agriculture, and broadcasting.

Estimated Fee: Depends on business industry and issuing agency

5. Zoning Permit

A zoning permit allows you to operate your business in a particular location, given the type of venture you own and the industry you belong to. After all, different municipalities have their own rules regarding which kinds of businesses can run in certain spots. You need to get a zoning permit for your business from your county or city zoning department. You are required to follow the zoning guidelines in your area to gain a zoning permit.

Recommended For: Business owners running a brick-and-mortar store, distribution center, or manufacturing facility

Estimated Fee: Varies widely depending on the state and the size of commercial property. Ranges from around $50 to $1,500.

6. Building Permit

The building permit gives you permission to construct a new building or to remodel an old building. You or your contractor must apply for a building permit from the building department of your city or town. In order to get a permit, you will typically be required to submit your site, structural, and architectural plans. Plus, you might need to provide information regarding safety protocols, accessibility, electrical, plumbing, and occupancy.

Recommended For: Business owners who plan to start a new construction project or to make major changes to existing structures

Estimated Fee: Widely varies based on size, complexity, and location of the construction project. Ranges from around $400 to $2,200+.

7. Occupational License

An occupational license grants you the authority to provide certain professional services through your business. In order to get an occupational license, you need to prove to the board or other certifying bodies in your industry that you gained the necessary skills and knowledge in your field through proper training and education.

Some industries require you to take and pass a written or practical exam, while others expect you to complete training modules or educational courses. Keep in mind that the actual requirements will depend on the type of occupational license you are pursuing.

Recommended For: Business owners and team members who practice specialized occupations, such as medicine, healthcare, law, accounting, real estate, electrical work, plumbing, and cosmetology

Estimated Fee: Based on the type of occupational or professional license. Starts at $60.

8. Health Permit

A health permit allows you to operate your business by verifying that you have met the safety standards of the health department. You need to get a health permit if your business is related to food preparation and distribution or if it involves direct body contact with customers. If your business falls under these criteria, you must apply for a health permit with your county health department. You will typically be required to undergo facility inspections, as well as to complete certification courses based on your type of business.

Recommended For: Business owners of restaurants, food delivery services, beauty salons, massage parlors, and nail spas

Estimated Fee: Widely varies based on the business industry, size, and location. Ranges from around $100 to $3,000+.

9. Special State License

A special state license gives you permission to sell certain types of products, such as alcohol, gasoline, firearms, and lottery tickets. You need to apply for this type of license to prove that you have met state-regulated standards related to the sale of these items. Some examples of state agencies that issue special state licenses are the Alcoholic Beverage Control (ABC) and state gambling agencies. The requirements differ based on the type of license you are applying for and the issuing agency you are coordinating with.

Recommended For: Business owners who offer goods like alcohol, lottery tickets, firearms, and gasoline for sale to consumers

Estimated Fee: Depends on the business industry and issuing agency.

What You Need To Know About Business Licenses

Do I Need a Business License?

Yes. You need a business license to operate a business venture in the U.S., whether you are planning to build a small startup or a large corporation. It’s important for you to figure out which business licenses you should apply for because there is no one-size-fits-all solution when it comes to licenses and permits. You can determine the type and amount of business licenses you need based on the size, industry, and location of your business.

Should I Apply for a Business License Independently or With Professional Help?

It is possible for you to apply for a business license independently. After all, there are forms which you can download and information which you can read on official government websites. However, it is still a smart choice for you to consult with experts to ensure that your business meets all the regulatory requirements of the local, state, and federal government.

You can hire an accountant and lawyer if you need professional assistance in setting up a small, mid-sized, or large business. Aside from this, you also have the option of utilizing one of the best LLC services if you want to start your own LLC with minimal hassle.

What Do I Need To Do To Start a Business Aside From Getting a Business License?

There are other vital tasks that you need to complete aside from getting licenses and permits if you are starting your own business, such as:

1. Get an EIN: Apply for an Employer Identification Number (EIN) if you plan to hire employees or to offer products and services through your business. You can get an EIN online from the Internal Revenue Service (IRS).
2. Create a Bank Account: Open a business bank account to store your business funds and facilitate financial transactions. Consolidating your business resources in a dedicated account makes it easier for you to monitor your sales, profits, and expenses. You can also open a business account with EIN only.
3. Hire a Registered Agent: Enlist the services of a registered agent if you are establishing an LLC or corporation. A registered agent is a person or entity authorized to receive legal correspondence and documents on behalf of your business.

Bottom Line on How to Get a Business License

Applying for business licenses is one of the first steps to starting your own legitimate business. We hope that this guide helped you figure out which types of business licenses and permits you need as an entrepreneur. Bookmark this page so you can quickly review how to get a business license.

A registered agent is an individual or entity responsible for receiving official documents on behalf of your business. If you want to register your business in a state, you must also appoint a registered agent as mandated by state law. Continue reading to find out how to hire one or if you can be your own registered agent. 

What is a Registered Agent?

A registered agent is also known as a resident agent, statutory agent, or agent for service of process. Its purpose is to be a business’ official point of contact with government and judicial authorities. An agent can be an individual or company, and they receive and manage official notices for your business. These official documents include but are not limited to:

• Official letters and government correspondence from the Division of Corporations, Secretary of State, or other state government agencies dealing with registered businesses
• Federal government correspondence, information, and notifications
• Service of process notices (these are legal notices and are issued if your business needs to appear in court)
• Tax forms and requests for tax payment
• Notifications to complete permits, business filings, or reports

The agent also must relay these documents to your business in a timely manner so you can take due action. Every LLC, corporation, or a non-profit organization, must appoint a registered agent at the time of registration.  

Different states have different eligibility criteria for resident agents. So you can be your own registered agent if you meet the requirements. You have to give your agent’s details on your articles of organization and file them with the state. This information then becomes part of public records. So, you can put your privacy at risk if you choose to be your own agent.

Why Do You Need a Registered Agent? 

All registered businesses must appoint a valid registered agent if it wants to operate in a state. But why is that? 

The primary purpose of an RA is to act as a reliable point of contact between a business and the general public, state and federal governments, and the courts. The requirement for companies to appoint a resident agent first came about as part of the due process of law. 

If your business must deal with a lawsuit, legal proceedings cannot move forward unless you get proper notification. With an agent in place, it becomes easier for courts and other authorities to contact you. You also need to name your resident agent when opening a business bank account.

Who Can Be a Registered Agent?

Every state has a set of eligibility requirements for registered agents. Any individual or company that meets these criteria can be an agent in that state. That said, the general requirements are pretty similar for almost all states and they are:

• Age: If you appoint an individual, your agent must be at least 18 years of age.
• Residency: If you appoint an individual, they must be a resident of the state in question. If you use a company’s services, it must be authorized to operate in the state.
• Physical address: Your agent must have a physical address in the state in question to receive all documentation at. 
• Availability: They should be available at the registered address during business hours throughout the year.
• Consent: Some states require agents to submit a consent form to be an agent.

These requirements can differ slightly for different states. For instance, Arizona doesn’t require agents to be available at the registered office during business hours. Virginia only allows licensed lawyers, officers, or employees of your business to serve as registered agents.

Can I Be My Own Registered Agent?

Yes, you can. As a business owner, you can be the agent for your company as long as you meet the criteria set by your respective state. You can also appoint an employee or a fellow business member. But this begs the question, should you be your own registered agent?

On the surface, appointing yourself, a colleague, or a friend seems like the easiest solution. But it isn’t as simple as it seems. Being an agent means you have to be available at your office during all business hours throughout the year. 

If you or your agent is not available for some reason during a delivery, your business may face severe consequences. This is why most business owners and employees don’t take this responsibility. Moreover, being your own RA means your name and contact information will be public. This may put your privacy at risk.  

Smart entrepreneurs tend to hire registered agent services. These are third-party legal service providers that can be your agent in return for a reasonable annual fee. We recommend you hire a professional legal service for peace of mind, privacy, and to avoid legal issues. 

Why Use a Registered Agent Service?

Hiring a professional registered agent service like Northwest Registered Agent or LegalZoom is a better choice than being your own agent. It’s also better than appointing an employee as one. Here’s why.

Saves Time

According to a recent study, 72% of small business owners say administrative tasks are the biggest time drain. This includes paperwork. If you take on the responsibility of being your own agent, you’re adding to the never-ending list of managerial tasks and taking on more than you can handle. 

It’s always better to delegate tasks like these so you can focus on the things that matter while improving your work-life balance. Plus, when your contact information is public you’re likely to receive a lot of junk mail. Save yourself the hassle of sifting through tons of junk mail and let a legal service handle it for you for an inexpensive annual fee.

Gives You Peace of Mind

With a professional legal service serving as your RA, you no longer have to worry about being available during business hours at your office. This way, you can focus on running your business or take a vacation when you want. Your professional registered agent is always there to receive documents on your behalf and inform you timely.

More often than not, a resident agent service provider is also a legal service and can give you invaluable advice on how to proceed with your tax and legal matters. This is just like hiring a business legal assistant but at a much lower price.

Gives You Flexibility

A registered agent service lets you have flexible working hours. And you can expand your business to multiple states with ease. Every state requires that your statutory agent must be at a physical address in the state you’ve formed your LLC. If you choose to be your own registered agent, it isn’t possible to expand to another state without an official agent.

Professional registered agent services have physical addresses in all 50 states, so you can form an LLC in any state. If you’re thinking about forming an LLC in multiple states, hiring a statutory agent is a must. 

Protects Privacy

Hiring a professional service of process agent means that their address and contact information is public, not yours. If you’re served a lawsuit, an RA service ensures to convey it to you in the most private manner. This saves you the risk of receiving a summons in front of people you know or your customers. 

Legal Compliance

Last but not least, a professional agent helps you ensure your company stays compliant with the law. It sends you regular reminders to keep you updated with all state requirements. Plus, it files documents like annual report filings on time.

Plus, registered agent services also keep copies of important government and legal documents for safekeeping. If you lose your original documents for any reason, you always have a backup. 

How to Hire a Registered Agent Service Company?

If using a professional agent service is a better choice for you, the next step is to choose one. The service costs anywhere between $100 and $300 per annum, with the majority of them charging $150 for a year. This is pretty inexpensive for the range of benefits that come with professional resident agent service. 
Here are some of our top picks when it comes to registered agent services. Note that these are also part of our picks for the best LLC services.

Northwest Registered Agent

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Northwest Registered Agent is the second-largest registered agent service in the US. It offers the service in all 50 states and is an excellent choice for you if you’re looking for high-quality customer service and strong privacy protection.

You get locally scanned docs, business address use, mail forwarding, mail scanning, annual report reminders, a company management system, and top-of-the-line customer support with Northwest. Apart from the agent service, Northwest also offers quality LLC formation services. Read our complete Northwest Registered Agent review to learn more about it.

• Offers privacy protection
• Quality customer service
• Transparent pricing

• Limited features
• Pay extra for EIN service
• More expensive than alternatives

Pricing

• $125/state per year
• $5200 in all 52 jurisdictions

LegalZoom

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LegalZoom is a high-end online legal services provider that offers a registered agent service across the United States. With over 2 million businesses helped, LegalZoom is a well-known and reliable service provider, but it may charge you higher than other options.

LegalZoom alerts you whenever it receives important mail for you. With the Compliance Calendar, which comes at an additional $69, it can also email your business about critical tax and annual report deadlines. To top that off, you get unlimited cloud storage to store your documents safely. Read our complete LegalZoom review to learn more.

• Well-established service with 2 million+ businesses helped
• Offers a wide range of legal services
• Robust customer service

• More expensive than alternatives
• Slow turnaround time
• Excessive upsells

Pricing

• $299 per year

ZenBusiness

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ZenBusiness is a top-quality registered agent service you can avail of at a much lower price. It has a transparent pricing plan with no hidden fees and is up-front about its other services like compliance documentation and annual report filing. However, getting to the pricing plan can be a painstaking process.

ZenBusiness has an online document management system and sends you regular compliance alerts to make sure you’re up-to-date with all legal requirements. It also scans and uploads important legal documents to get them to you straight away and mails you physical copies if required.

Plus, if you use ZenBusiness for LLC formation, you get its agent service for one year completely free. To learn more about its services and pricing, read our complete review on ZenBusiness.

• Inexpensive option
• Transparent pricing
• Free registered agent service with LLC formation

• No free plan
• Worry-Free Guarantee is not included with the regular agent service
• Annual compliance costs extra

Pricing

• Registered Agent – $99 per year
• Registered Agent with Annual Compliance – $149 per year

Bottom Line on What a Registered Agent Is

Appointing a registered agent is one of the most important steps in registering your business as an LLC, incorporation, or non-profit organization. Luckily, understanding what an agent does is pretty straightforward. You can even do it yourself if you can stick around your registered office during normal business hours. 

We still recommend you hire a professional registered agent to handle things on your behalf. It saves you time, protects your privacy, gives you peace of mind, and greater flexibility with your business.