Q&A #172 – Can nonprofits use a virtual office as their registered agent address?

Question: I am in the process of forming a new nonprofit organization and my state requires that I name a registered agent and registered office address that is not a post office box. I do not want to use my home address and I cannot afford to lease a physical office at this time. Would using a virtual office with a mail service satisfy the registered agent requirement?

Answer: It is a universal requirement that the office address of an organization’s registered agent (sometimes called a “resident agent”) must be a physical street address and not a P.O. Box, but only a few states address whether a “virtual office” can be acceptable. However, using a virtual office is generally not advisable if the registered agent will not be present there during normal business hours.

All nonprofit organizations must designate a registered agent at a specified registered office in the state of incorporation as well as any states in which the organization is registered as a “foreign corporation.” The purpose of this requirement is to ensure that an organization is available to receive important official correspondence such as service of process in the event the organization is sued or notices from the state government. Registered agent rules help to ensure that business entities such as nonprofits, LLCs, and for-profit corporations are reachable and accountable to the citizens and authorities in the state when necessary.

In light of the need to ensure the availability of the registered agent and facilitate service of process, all states require the registered agent’s office to be a physical street address rather than a P.O. Box. The reason for this is that a P.O. Box.

All states provide for the use a “commercial registered agent” (a company that is licensed in the state to provide registered agent services to the public for a fee). And most states also permit nonprofit organizations to name a Board member, officer, or employee of the organization as a registered agent at the organization’s business address (subject to age and residency requirements that may vary from state to state).

Virtual offices (typically shared office spaces that provide services such as mail processing, flexible use of physical spaces on an as needed basis, and other services such as virtual phone answering and call forwarding), are an increasingly popular choice among nonprofit organizations. Virtual offices are more affordable for organizations that do not need a full-time brick and mortar office, and technically would appear to satisfy most state registered agent laws requiring a physical street address rather than a P.O. Box.

However, using virtual offices to fulfill registered agent requirements can be problematic if the registered is not regularly present in-person at the address during normal business hours.

First, some states explicitly require that the registered agent be physically present at the registered office address. For example, Section 132(b) of the Delaware General Corporation Law requires individual registered agents in Delaware to be “generally present at a designated location in this State, at sufficiently frequent times to accept service of process and otherwise perform the functions of a registered agent.” Similarly, Section 48.091(3) of the Florida Statutes requires that a registered agent be available at the registered office “from at least 10 a.m. to 12 noon each day except Saturdays, Sundays, and legal holidays.”

Consequently, using a virtual office as the organization’s registered agent address in these states will not satisfy the requirements if the registered agent is not actually present at the address and available to accept service of process on behalf of the organization and receive other correspondence when necessary. It is important to check whether the laws of your state have similar requirements.

But even in the states that do not explicitly require the registered agent to be present and available during certain normal business hours, using a virtual office that is little more than a mail processing service is generally not advisable. Considering the purpose of the registered agent rules, the requirement that the registered agent be reasonably available and reachable at the registered office is, at a minimum, strongly implied.

Planning Tip – Use caution when naming an individual Board member, officer, or employee as an organization’s registered agent. Many organizations forget to update the registered agent information with the applicable state authority when these individuals step down from their role or otherwise leave the organization. This can cause the organization to inadvertently violate registered agent requirements and/or cause a headache for these individuals, who may not have realized they remained responsible for fulfilling the duties of a registered agent. In the long run, paying the relatively modest fee for a “commercial registered agent” is usually a better option.

The risks of not complying with both the spirit and letter of the applicable registered agent statutes may seem remote, but can actually be quite serious, potentially including financial penalties, revocation of an organization’s ability to do operate in a state, inability to file lawsuits in the courts of the state, and default judgments in the event the organization is sued and fails to receive service of process.

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