Certificate of Good Standing: What You Need To Know

As soon as you’ve completed the process of establishing your business in a certain state, you may start to see references to obtaining a certificate of good standing for your business. This document is a type of verification for your business and is essential to have on hand as you start to grow your business, apply for financing, and build a reputation with your customers.

It is important to note that only certain business entities will be able to receive a certificate of good standing, something we will be discussing later on. Below, we will give you the rundown of what a certificate of good standing is and why it is essential for your business to have one.

What Is a Certificate of Good Standing?

Your certificate of good standing is a document that indicates your business is legally registered with the state and completely authorized to conduct operations in said state. The certificate will be a physical document you can acquire from the Secretary of State’s office or other state agency through which you initially registered your business.

For your business to be recognized in good standing and be eligible to receive the certificate, you must have met all state establishment requirements, paid any applicable fees or business taxes, and fulfilled all ongoing requirements, such as annual report filing or publication requirements.

It is important to note that you do not need to have your certificate of good standing on hand in order to conduct operations in your chosen state, but you may need it when applying for business financing or to prove your status as a legally operating business.

Who Needs to Apply for a Certificate of Good Standing?

Only certain types of business entities are able to obtain a certificate of good standing. This is due to the fact that your business must be formally registered with the state to be eligible for a certificate, and not all entity types require a registration process.

The following business types are able, and often recommended, to acquire a certificate of good standing from their state agency.

• Corporations (all corporation types, including S and C corporations)
• Limited Liability Companies
• Limited Partnerships
• Limited Liability Partnerships
• Limited Liability Limited Partnerships (only if the state allows for the formation of this entity)

The following business types are not required to officially register with the state, which means that they will not be eligible to receive a physical certificate of good standing.

• Sole Proprietorships
• General Partnerships

However, if you are running one of these business types and are asked to show proof of good standing, you will likely need to produce tax returns or bank statements for your business as an assurance to lenders or investors.

Make sure to always check with your chosen state’s registration requirements and information on who is eligible to receive a physical certificate of good standing, as rules can vary widely from state to state.

The Benefits of Having a Certificate of Good Standing

Even though having your certificate of good standing on hand isn’t required to conduct business, making sure this document is available to you can bring you a number of benefits. For example, you may be asked to show your certificate in any of the following situations.

• Opening a business bank or credit account
• Applying for business insurance
• Securing a business loan, including government-backed contracts and loans
• Fundraising with investors
• Recruiting business partners
• Forming new contracts with other businesses or suppliers
• Registering your business in a new state

Making sure that you have your certificate of good standing ready in any of these situations can prevent you from last-minute hold-ups and stress as you scramble to quickly obtain proof of your business’s operations and legal registration with the state.

That being said, it is important to remember that certificates of good standing may expire depending on state rules. For instance, some are only valid for specific short periods (such as 90 days from the date of issuance), while others may last for a year or two before expiring.

Certain organizations, such as banks or investors, may also request that your certificate of good standing has been received within a specific time frame, such as 60 days before applying for a loan or bank account. The certificate you receive from the state will most likely have both the date of issuance and expiration listed on it, so it is essential to preplan and look into your state’s specific rules on a certificate’s validity in addition to outside requirements.

Additionally, some states will not allow you to expand your business into that specific state if you cannot show proof of your good standing. Therefore, if you want to expand your business, you must provide proof of your business’s legitimacy when registering. Finally, similar to some banks and investors, certain states may require your certificate of good standing to be dated within a definite time period.

The Importance of Maintaining Good Standing

Even though a physical certificate of good standing is not required to be obtained in most states, it is still incredibly important to keep your business in good standing. If you fail to meet certain filing deadlines (such as filing annual reports) or pay fees on time (such as annual business taxes), you face a risk of being fined by the state.

A lack of good standing often means that your business will not be in compliance with state regulations. This can lead to a lack of liability protection (this applies to LLCs and LLPs particularly) and the chance of an involuntary dissolution of your business by the state.

You should also be aware that losing good standing with the state can lead to losing access to state courts, a higher risk of identity theft, and a lengthy (and sometimes costly) reinstatement process if you try to get back in good standing with the state.

How to Get a Certificate of Good Standing

If you are interested in obtaining a certificate of good standing for your business, you will need to check with the state entity where you initially registered your business. In most cases, this is the Secretary of State’s office, but it may be a different department or government organization depending on your state of operations.

You should also note that a certificate of good standing can also be referred to as a ‘certificate of status,’ a ‘certificate of existence,’ or another similar variation.

Upon request of your certificate, you may need to pay some type of documentation or filing fee. Depending on your state and specific rules, this can range from $10 to $100. You may also request any registered agent service you are employing (such as ZenBusiness) to file for the certificate on your behalf. This will also likely come with a fee ranging from $25 to $100. Another benefit of using a registered agent service for this process is that the service can also help bring your business back on track if it turns out you are missing certain compliance elements.

In general, you can use your state’s business entity search (this is usually found on the Secretary of State’s website) to check whether or not your business is in good standing. Once you have located your business (you can search by your business’s EIN, state ID number, or its official registered name), you should be able to follow any instructions that appear for requesting a good standing certificate.

Some states allow for online filing, while others will provide you with directions for how to file via mail. You will either have your certificate mailed directly to you or be given a secured document to print out.

Keeping Your Business Compliant

Even though obtaining a certificate of good standing for your business isn’t required by most states, it is a good idea to have this document on hand. With it, you will be able to provide simple proof that your business is operating and meeting all requirements in your chosen state. Just keep in mind to check with your state’s specific requirements on the expiration of your certificate and any outside time requirements for the certificate.

And even if you choose not to obtain a certificate of good standing from the state, you should always remember to meet ongoing compliance requirements in order to keep your business in good standing and avoid any major operations issues.