Hi!!
First of all, congratulations on your home based business that appears
to be growing! Its kind of like raising kids, isn’t it? Hard work,
frustrating at times, but the rewards are so satisfying.
I am an attorney and our little firm specializes in business law. I
applaud your choice to use an attorney to assist in your incorporation
– there are so many cases where issues that appear to be tiny and of
no consequence to the incorporator may ring alarm bells with the
attorney and cause him/her to suggest some little tweak to the
organization that may save you real money or pain in the future. To,
the attorney may advise you that a Limited Liability Company ("LLC")
may be more appropriate - or some other entity.
1. Should you be the Agent for Service of Process? I think so.
You may know about “service of process” but just in case this term is
a bit foreign to you, let’s take a look. Black’s Law Dictionary
defines service of process as: “the formal delivery of a writ,
summons, or other legal process.” Black’s 7th ed at 1372. “Process”
itself is “a summons or writ, especially that to appear or respond in
court.” Id. at 1222. In its simplest form, an "agent for service of
process" is the person to contact when you, or your business entity,
is being sued by someone. Now generally, the rule is that a “process
server”, who typically cannot be a party to the action, must
personally deliver the summons and complaint to the defendant.
California, and many other states, provide that rather than having to
play detective and track down a person, someone is registered with the
State (the California Secretary of State in this instance), is located
within the State, and is required then to accept the summons and
complaint thereby (rebuttably) creating jurisdiction over your
corporation. After service is made the clock begins ticking defining
the period in which the corporation, as the defendant, must provide an
Answer to the court and to the plaintiff.
The Calif. Secretary of State states that “a corporation CANNOT ACT as
its own agent. Approval from a proposed agent [other than yourself]
should be obtained prior to designation.”
http://www.ss.ca.gov/business/corp/corp_faq.htm#question9
The weight of this is simply that an INDIVIDUAL (or another
corporation specifically established to receive service under section
1505 of the California Corporation Code – a professional agent,
typically used by out-of-state companies registered to do business in
California) must be established in your application.
2. Do the attorneys that do incorporation service usually allow this
option or would have a preference? I’m sure that there is no firm
answer to this, but many attorneys would rather not. It creates a duty
for them to keep track of you; and it creates some level of liability,
though typically not great, for the law firm if they assume that duty.
Now, on the other hand, even lawyers have to make a buck (as odd as
that may seem) and perhaps they offer this “service” of being your
agent for an annual maintenance fee. This may be a good thing. We have
many clients who we see every year. We hold a board meeting – make
sure that the minutes are up to date, that the officer and shareholder
elections are done according to Hoyle, update their estate plans,
advise them on new business issues that have arisen or are planned in
the coming year, and generally have a professional look at the entire
operation through an outsiders eyes. Typically, the company’s CPA is
invited to this sit-down. It may cost a couple of hours of attorney
time (say $300 - $1000) but those that use that service find that it
is a useful corporate management tool.
You can certainly have the benefit of the attorney/CPA annual review
without having the attorney be your agent for service of process.
3. What is the norm when companies incorporate through an attorney?
Although I have no formal research on this issue, it would an easy
guess to say that the vast majority of corporation filings would have
one of the incorporators, and not the attorney, be the agent for
service of process.
4. Would the attorney usually charge differently based on this? Well,
this would be an opportunity to insert many lawyer jokes, but the
honest answer is that, yes, there almost certainly would be a (small)
charge for this service. The attorney must keep a file open, he/she
would have to manage that file, and there is some risk to the attorney
if he/she messes the thing up and doesn’t notify you if there is a law
suit.
[Speaking of lawyer jokes, did you hear about the new microwave
lawyer? You spend eight minutes in his office and get billed as if
you'd been there eight hours. What do a baker and an attorney have in
common? They both enjoy carving up the pie. How many lawyers does it
take to change a light bulb? Your light bulb or theirs? (or) How
many can you afford? What’s the difference between a law firm and a
circus? At a circus, the clowns don’t charge the public by the hour.
In the law the only thing certain is the expense.] Thanks to Nolo
Law. http://www.nolo.com/humor/jokes.cfm But I digress.
5. How differently (meaning would he usually charge more if he is the
agent, or less?) He/she would certainly charge more. How much more.
Hard to say (but see social commentary in paragraph immediately
preceding). A few hundred dollars? Maybe less, since as a business
proposition, the attorney may feel that this is a way (acting as your
agent) to tie you to the law firm so that he/she is better able to get
more business from you.
SUMMARY: In the big picture, this is not a Big Issue. It only becomes
an issue if (and we hope it never happens) your company is sued by
someone. If the service of process comes to you, you simply find an
attorney to handle the law suit (Never Try To Do That On Your Own!!!),
give the attorney the summons and complaint, and tell them to Answer.
Period. That simple. You maintain some control over the process – for
example, you could pick another attorney and not have to be in the
potential pickle of telling your registered agent attorney that
“sorry, I’m taking this to Joe Never-lost-a-case.")
Of course, you want to pick an attorney that specializes in business
law. If he/she has some experience with your type of company, that is
a Huge plus. Talk to some of your friends in the business. They may
have a recommendation. Talk to an accountant or other professional
business contact about a recommendation.
Again, best of luck in your enterprise.
And thanks for visiting us here!
Weisstho
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