Make Sure Your Business Has a Registered Agent and an Employee Identification Number
By BuildMyBiz on November 19th, 2014
Your registration paperwork likely asked you to designate a registered agent and your Employee Identification Number. If you don’t have either of these, it’s vital that you apply for them before anything can be processed.
First of all, what is a registered agent and what do they do?
Well, once a business is formed on the state level, most jurisdictions require corporations or LLCs to designate a registered agent (or an RA) to receive documentation on behalf of the company. Basically, an RA is an individual or an entity that receives, or is served, documents relating to your business.
The types of documents a Registered Agent will typically receive are, business and legal documents from county, state, and U.S. agencies on behalf of the corporation or LLC. These documents include such things as notices of litigation (service of process), franchise tax forms and annual report forms.
The Registered Agent must have a physical (street) address in the state in which the company is formed-that means no P.O. Boxes. Additionally, the Registered Agent must be available during regular business hours to receive service of process. The Registered Agent’s name and address are listed on the formation documents of the business and that information is kept on record as the official contact for the company. In fact, Registered Agent information is considered a matter of public record.
If you don’t appoint a registered agent for your company:
- You may not be able to legally enter into contracts or gain access to the state court system
- Your company can be subject to monetary, civil, pr criminal sanctions
- Your company may fall out of good standing with the state
Many business owners opt to use a Registered Agent service because it gives their business a sense of privacy when being delivered legal documents (like if you were to ever get served—you wouldn’t want your customers to see that), though, it is possible to act as your own RA.
Now what about an Employee Identification Number?
An EIN acts as a sort of social security number for your business. You need an EIN so the IRS can track what types of taxes your business needs to pay. Not every type of business needs an EIN, like sole proprietorships—they can just use the SSN of the owner to act as the business’s EIN, but it’d be in every business’s favor to file for one.
With an EIN, you can hire employees! If you decided to go the sole proprietorship route, the profits and losses your business earns are going to be reported as a part of your personal income. Though when you hire an employee, you become responsible for withholding the appropriate amount from that employee for taxes. When this occurs, the IRS can no longer depend on your SSN to keep track of what you owe them so an EIN is needed.
Additionally, a lot of business owners feel more comfortable using an EIN over their SSN for business. This number is needed often, and not all business owners feel comfortable accessing their SSN for business needs on a regular basis.
Finally, before you open for business, you’ll need to get all of the necessary licenses and permits.