What is a Resident Agent and why do I need one?
Most people that own investment real estate in the USA own their property in an entity. This can be any type of entity a corporation, LLC or LLP etc. most people use an LLC so I will assume that is the case. The property is held in the LLC to protect the owners’ liability. If someone was injured on the property the owner could be sued for damages, if they owned the property in their own name all of their worldwide assets may be claimed by the injured party, but by placing the property in an LLC it is owned by the LLC and therefor the only assets that can be claimed are those owned by the LLC, usually just the property. Obviously the LLC is owned by you.
Federal & State law dictate that to do business in the State where the LLC is registered, it must have a physical presence in that State, that is an actual address (not a P.O. box) and an actual person to receive official post i.e. IRS letters, Citations & summonses etc. US residents can act for themselves provided they live in the same state as the LLC is registered, but non US residents need someone to act for them, this role is taken on by the Resident Agent (RA). The Resident Agent provides the physical address and the person. It’s a bit like a Company’ Registered Office in the UK, small companies often use their accountant and their address.
You may appoint anyone who resides in the state your LLC is registered and you may change them whenever you wish. You MUST notify the State of any changes, together with the name and address of the chosen RA. Failure to appoint a resident agent or to notify the State of any changes would put the LLC in ‘bad standing’ and make it un-lawful to conduct business. This would mean that your bank account would be closed, it could be difficult to sue anyone, which in turn could make evictions harder, the property managers would have nowhere to pay rents to (they could sent a cheque overseas, but they would need to deduct 30% withholding tax and would probably charge additional fees for doing so), remember the property is owned by the LLC so the rent belongs to the LLC, any payments by the property manager must be made to the LLC. You would need to open a bank account in the name of the LLC somewhere that could receive deposits in USD. As you can see, not having a RA can be very inconvenient.
A good RA does a lot more than just provide an address and person. They can also provide help and advice on aspects of owning property, pay bills and file returns with the city, state or federal governments as well as being your eyes on the ground. The fact that they act for many clients also means that they can often get better prices than individuals and the cost of the service can often be recouped by the savings gained.