Why Entrepreneurs Prefer Forming A Business In California

Listen to this article

California has long been the state of choice for new business ventures, and aims to keep it that way. In September 2019, California’s Office of Business Economic Development launched a website aimed at connecting California’s small business community with critical resources. 

When starting a business, an important first step is appointing a registered agent. 

You can read more about registered agents on Incorporation Rocket. The requirements relating to registered agents differ between states. In California, a registered agent must be appointed before incorporating an LLC or corporation. It is a requirement to name your registered agent when filing a Statement of Information for either an LLC or corporation. The laws relating to registered agents in California specifically make California an attractive location for prospective entrepreneurs. 

What Does a Registered Agent Do?

Unlike other states, in California, you cannot act as your own registered agent. A registered agent is a reliable point of contact between the business and the state. This is a valuable asset to any business as, in the event that the business is sued, the suit will be brought to the relevant individual’s attention. The alternative scenario, a lawsuit being finalized without the defendant’s knowledge, would be untenable for any business. Accepting service of legal documents such as a summons is one of a registered agent’s most important roles. 

It is relatively simple and affordable to change your registered agent in California. You are required to submit a Statement of Information form, containing the details of the newly appointed registered agent, by mail or online. This process costs only $20 for corporations and $25 for LLCs. 

Your business will be protected in the event that the registered agent resigns, as the agent will need to submit a Resignation of Agent for Service of Process form (RA-100). This benefits the business while not being unduly cumbersome on the registered agent as the form is relatively straightforward and does not cost anything to submit. 

Types of Registered Agents

A registered agent can either be an individual with an address in California, or a corporation certified to act as a registered agent within California. An individual is potentially the less attractive choice, as their home address would need to be a matter of public record, and they would need to be available at that address during normal business hours, 09h00 to 17h00, Monday to Friday. A certified professional registered agent service on the other hand is reliable and convenient. 

Some businesses may choose to appoint their attorneys or accountants as their registered agents as there is already an established relationship. However, these options are typically more expensive than a professional registered agent service. Attorneys and accountants are also only able to operate in states in which they have physical offices. 

Benefits of Appointing a Professional Registered Agent Service?

A professional registered agent service can provide services both in California and nationwide. This will be convenient should you decide to expand your business into other states. Should you require services in multiple states, most professional registered agent services offer discount packages. 

Furthermore, your professional registered agent service can assist in ensuring your business is compliant with California’s maintenance requirements. 

Risks in Not Appointing a Registered Agent in California 

As previously mentioned, an LLC or corporation cannot be incorporated in California without a nominated registered agent. It is therefore not possible to simply refuse to appoint a registered agent. However, it is possible, once incorporated, for a business to fail to renew a registered agent’s services. Should this happen, the business could lose its good standing with the State of California and potentially run the risk of being dissolved. While this may seem harsh, the purpose of the registered agent is largely to protect the interests of the business. A business could lose all of the benefits discussed above if its registered agent services lapse. A business could have a court give Judgement against them without any knowledge of the lawsuit. A business may fail to comply with compliance requirements. The requirements in the State of California pertaining to registered agents are therefore a benefit to the business 

Final Thoughts 

There are a myriad of considerations to take into account when setting up a business. The requirement of a registered agent is simply one of those. In California, the requirements for appointing a registered agent, changing a  registered agent or resigning as a registered agent are simple and affordable. The legal requirements of registered agents in California help offer protection to the business which is why many entrepreneurs choose California to start their business ventures.