Hopefully, you’ll never need to deal with a lawsuit filed against your business. Lawsuits negatively affect businesses. They’re costly and time-consuming, and they can ruin relationships and a business’ reputation.
What happens when your business gets sued or otherwise served service of process?
However, as your business grows, so does its chance of being involved in litigation. And in any litigation, the plaintiff (the party filing suit) will have to serve process on the defendant (the party being sued). Read on to find out what happens if your business is owned by a corporation or LLC and it gets sued — and the role of your company’s registered agent in this process.
What is service of process?
If your business is sued, it will have to be served with process in order for the court to have jurisdiction over it. This also provides the court with the power to render a decision and to order the business to pay money damages to the plaintiff or take other actions.
Service of process refers to the delivery of the legal documents that gives a defendant notice of the legal action filed against it and the opportunity to respond. Valid service of process on a defendant is required by the U.S. Constitution.
Service of process must be accomplished by the plaintiff pursuant to the rules or statutes of the appropriate jurisdiction. These rules include how process documents can be delivered (such as in-hand delivery or certified or registered mail) and to whom that delivery can be made.
Who can be served with process when a business is sued?
If you own your business in your own name, process can be served on you. But if you formed an LLC or corporation to own the business, it is that LLC or corporation that must be served. When you formed your LLC or corporation, you designated a registered agent in your formation document. That registered agent can be served with process by someone suing the company.
The documents served are usually a summons and complaint. The summons provides notice of a legal action against your corporation or LLC, as well as the time period you have to respond. The complaint states why your company is being sued. Other documents that can be served on your registered agent include a subpoena for company records and documents and wage garnishments. Service of process can be delivered to the registered agent at the registered office (the registered agent’s address) during normal business hours.
The importance of having a reliable registered agent
When appointing a registered agent, you should consider a professional service provided by a corporate service provider. A corporate service provider is a company in the business of assisting business entities with their compliance needs. Using a professional registered agent, you have someone trained to handle legal documents and who will be physically present at the registered office address during normal business hours.
Another benefit — particularly for businesses with customers on the premises or home-based businesses — is you won’t need to deal with the negative connotations associated with being served versus when the plaintiff chooses to serve the registered agent at the registered office. A sheriff or process server delivering lawsuit paperwork in front of customers is not good for a business’ image.
You’ve been served — What’s next?
Once your registered agent has been served with process for your company, the next step is for the registered agent to notify and forward the legal documents to the appropriate contact in your organization.
You can instruct your registered agent who should receive the documents. Time is of the essence. Generally, an answer or response must be filed within 20 days of the receipt of service.
Another advantage of having a professional registered agent is that if your company is served, you have the peace of mind of knowing that legal documents will be delivered to a person that knows exactly what they are and how important it is that your business receives the service of process documents as quickly as possible.
Why you need an agent for service of process
What happens if a corporation or LLC is being sued and it doesn’t have a designated registered agent on record with the state? For one thing, that’s grounds for administrative dissolution in some states.
But aside from the statutory penalties, it also means the plaintiff may be able to serve your corporation or LLC by alternative methods, which often results in untimely, or worse, no actual notice of a lawsuit to the company.
In a worst-case scenario, a default judgment can be entered against a corporation or LLC with no knowledge of it being sued! Having a reliable registered agent, such as the services offered by CT Corporation, is critical so that a company can receive notice of any legal action in a timely manner, affording it the opportunity to defend itself.
Learn how to determine if your registered agent has the qualities needed for your custom service of process needs. Contact a CT Corporation representative at 855-316-8948 (toll-free U.S.).