A certificate of good standing is a state-verified document that certifies a company’s registration with proof that they have undergone all the necessary licensing and regulatory processes to operate legally. This certificate confirms that the company’s legal documents are all up to date and legally permitted to engage in business activities.
In some states, a certificate of good standing is also known as a certificate of status or existence.
What Does a Certificate of Good Standing Include?
A certificate of good standing ideally contains registration details such as registration issue dates, expiration dates, and dates for renewal, or any other periodic dates for registration fees, etc. The dates published on the certificate of good standing are subject to the state’s calendar year or any time of the year when the state’s laws demand a renewal or document filings.
Any organization or entity formed in the state has the legal authority to request a certificate of good standing. The same rule applies to an entity formed elsewhere, although it must register as a foreign entity.
Eligibility For Certificate of Good Standing
It’s important to understand that not all business types fulfill the requirements to register with the state, meaning there are a set of prerequisites that needs to be fulfilled by entities to qualify and obtain a certificate of good standing.
For instance, businesses registered as sole proprietorships do not need to legally register in any state, which indicates that a certificate of good standing for such entities is not mandatory. Although, it is an essential requirement for other entities registered as corporations or limited liability companies (LLCs) to own a certificate of good standing.
Various other types of business structures must be certified according to some state laws, but not all. They include limited liability partnerships (LLPs), limited partnerships, and limited liability limited partnerships (LLLPs).
If your business structure falls under any of these, you should check with your respective state laws to determine whether you need to register your entity or not. To summarize, whether you need registration of certification of good standing will vary from one state to another.
When is a Certificate of Good Standing Required?
A business will usually only need to present a certificate of good standing upon request, or when there is a need. The three common scenarios include:
You are requested to submit a certificate of good standing by a business partner, an organization, or any individual you are engaged in a business relationship with.
It is also likely for institutions such as banks to request a certificate of good standing when you want to open an account, apply for a credit card, or apply for a business loan under the same business name.
If you want to register your business in a foreign state, you’d be asked to submit a certificate of good standing to verify your entity details and registration.
Certificate Obtainment Process
Again, obtaining a certificate of good standing is subject to your state laws. For instance, in many cases, you’d have to formally apply through the Department of Business Licensing and Regulatory Office or the Secretary of State Office. You can also hop online to check if your state has an online registration option.
After you’ve successfully completed the application process, you have to wait to receive an email from the authorities to declare whether your application got approved or declined. This entire process can take up to 14 business days. And for hard copies of the certification of good standing, you must pay an additional fee to issue a request.
Does Your Business Satisfy State Requirments?
To address your prime concerns if your business satisfies state requirements or not, you have to ideally confirm that your entity is “in good standing.” You have to self-assess and identify why is it that you need a good-standing certificate. It is basically an official document that proves you are in line with your state's compliance and requirements.
Furthermore, here is what you may need to check to know whether you meet the needs of your state's requirements.
Complying with federal laws and guidelines such as insurance, building registration, permits, and health permits.
Following a detailed process of multiple tax forms (as per your state requirements) and registrations.
Financial report of your business, plus essential information.