What is an Organizer of an LLC?
The Organizer of an LLC is the person who signs the document that registers the LLC with the corporation department of the state under the laws of which the LLC is organized. In most states, the corporation department is part of the Secretary of State but some states have a different name for the agency with this function. In all states, however, the LLC is created when the formation documents are filed with the state.
Who can be the Organizer of an LLC?
There is no specific requirement as to who can be the Organizer. The Organizer could be the person who is setting up the LLC for his business purposes, a member of the LLC, an attorney, an accountant, or a person with a company that is engaged in setting up LLCs and filing the necessary documents.
What is a Registered Agent?
The laws of every state require a business entity, whether an LLC, corporation, limited partnership, or other type that requires registration with the state, to designate a Registered Agent. The Registered Agent’s name and address are on file with the state. This allows a government agency, another business entity, or an individual to have a location at which the entity could be reached for service of legal process, subpoenas, or other official communications. The Registered Agent is not an address for ordinary business communications.
Who Can Be a Registered Agent?
A registered agent could be an individual or a business entity. There are business service companies that provide the Registered Agent for an annual fee.
Being an LLC Registered Agent: Pros and Cons
The Registered Agent has the responsibility to receive and forward legal processes and official communications to the LLC. There are several companies that provide a registered agent in any state. For these companies, being the Registered Agent is often the main source of their revenue.
The negative side of being a Registered Agent is that the duty to receive and forward the legal process is a serious one. Failure to handle the process properly, such as a refusal to accept it or to forward to a wrong address might result in a default judgment against the LLC. A default judgment is when the plaintiff in a case against the LLC is awarded judgment because the LLC fails to appear. The Registered Agent could be held liable for negligence in such a situation. For this reason, the LLC might want an established service business to be the Registered Agent rather than an individual who may move, die, or in some way be unable or unavailable to receive the legal process.
Being an LLC Organizer: Pros and Cons
An advantage to being an LLC Organizer is that if a principal of the LLC acts in that capacity, the LLC does not have the expense as it would if the Organizer is hired, such as an attorney, accountant, or a person with a business service company.
The possible disadvantage of being an Organizer is that the Organizer’s name is on the public record with the state. If, for some reason, the LLC cannot be located by an individual, business, or government entity, they may look to the Organizer as a last resort even though the Organizer, in that capacity, has no additional responsibility after the documents are filed. If the Organizer is also a member that could be a way to reach a member since members are not on record with the state.
Rules for the Registered Agent vs. the Organizer
Once the LLC documents are filed, the Organizer has no further responsibilities unless that person performs some other function for the LLC. The Registered Agent, however, is bound by a number of rules, both by statute and by general rules regarding negligence and liability.
The Registered Agent must keep its address current on the records of the Secretary of State. If the Registered Agent, such as a corporate service company, or an attorney or accountant active in business formations, changes its address, it must file the change for each of the companies it serves. In some states, a blanket change of address filing will cover all of the companies for which it is a Registered Agent. In other states, a change must be filed for each of the companies individually.
This is a very serious responsibility. If a Registered Agent moves without filing the appropriate change of address, and official communications or legal process is sent to the former address, the Registered Agent could be liable for the LLC’s failure to respond to the official communication or legal process.
Can the Registered Agent and the Organizer be the same person?
The Registered Agent and the Organizer can be the same person. This depends on how the LLC is set up. If you use a corporate service company, that company might be the Registered Agent while an employee signs as an Organizer. If you are setting up your own business as an LLC, you or an associate might be both.
CAUTION. While the Organizer’s responsibility ends when the LLC documents are filed, the Registered Agent’s responsibility continues regarding its obligation to receive and forward legal process and official communications.
LLC Organizer vs. Member. What are the Differences?
The Organizer is the person or business responsible for creating and filing the articles of organization. This is a temporary role that ends when the LLC is formed. The Organizer may be, or may become a member, but does not have to be.
The members are the owners of the LLC and make the decisions regarding the operation and business dealings of the LLC.
Understanding the different roles of the Organizer and the Members allows for informed decisions once the LLC is up and running.
