Texas Registered Agents: Not Just Boilerplate

Every entity created by a certificate of formation filing with the Texas Secretary of State (corporations, LLCs, limited partnerships, etc.) and every entity created under another state's law but which wants to transact business in Texas  MUST DESIGNATE and MAINTAIN a  "registered agent" and a "registered office" where that agent can be served with process in Texas.  Nearly all  business owners consider this one of those little routine ("inconsequential," "annoying," "legal nonsense") items that somebody else — the attorney, the accountant, or maybe just a secretary or receptionist — will take care of.  Sort of like making sure the envelope has a stamp before it's mailed.

Problem One: If You Don't Maintain a Registered Agent or Registered Office, or That Agent Doesn't Do His Job, You Can Lose Your Lawsuit by Default

Apparently that is exactly what the owners at  El Paisano Northwest Highway, Inc. thought, too.  But their thought process has probably changed.

A default judgment can have that effect, especially when you then pay to appeal that trial court defeat and lose at the next level.

Irma Arzate managed a restaurant operated by  El Paisano.  After her employment there ended,  Arzate sued El Paisano for unpaid wages.  Because citation of a civil suit can be served upon a corporation's registered agent, a process server tried four times to deliver the citation, petition and discovery request to El Paisano's registered agent at the company's registered office, then, in compliance with the law, gave up on serving the registered agent and served the Secretary of State instead.  (The Secretary of State is the substitute "registered agent" for an entity if it fails to maintain a registered agent or registered office or if the registered agent cannot be found after reasonably diligent search.)  The Secretary of State then mailed — by certified mail, return receipt requested —  a copy of the citation and other papers to the registered office address for El Paisano.

The package was never claimed by the registered agent and was returned to the Secretary of State.

El Paisano had been duly served, despite the fact that no one at the company actually received citation of the lawsuit filed against it.

At trial, El Paisano argued that it was all the plaintiff's fault: she should have told the process server to go to the company's principal place of business instead of the registered office.  The court laughed that off: the plaintiff doesn't have to show up at the defendant entity's place of business to serve it, but lawfully can rely upon only serving the registered agent.

The real kicker is the identify of the registered agent: El Paisano's President!

Maybe she thought she'd save some money by pulling double duty as registered agent AND the chief operating officer.  Maybe she knew the lawsuit was on its way and thought she could prevail against her former employee's claim by just refusing to accept service of process.  Maybe she just forgot to change an old registered office address when she or the company moved.

Did not matter.

El Paisano didn't get to argue the merits of Arzate's claims or present defenses on its behalf.

Arzate (and her attorney) won, hands down, without ever firing a shot; and El Paisano lost, without ever getting a shot off.

Problem Two:  Even if Nobody Sues You, the Secretary of State Can Terminate Your Company if It Fails to Maintain a Registered Agent or Registered Office in Texas

If the Secretary of State becomes aware that a domestic entity or a foreign entity (like a corporation, LLC, limited partnership, etc.) is NOT maintaining a registered office or registered agent, then the SOS may mail a notice about the deficiency to the company EITHER at its principal place of business OR its registered office "as shown on the records" of the SOS.  That means — like the substituted service of process in the El Paisano case — the SOS doesn't have to search for the company's current address by Google or checking the Comptroller's database or any other means; the SOS just pulls up the last information the company properly filed with the SOS  to establish its registered office and registered agent.

If the company doesn't correct the problem within 90 days, the SOS may terminate the entity's existence.

That is bad.

 

 

 

 

 

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