A Certificate of Good Standing which may also be called a "Certificate of Authorization" or a "Certificate of Existence" is used by a business entity (Incorporation or LLC) to prove that they are incorporated and legally authorized to transact business in a particular state or jurisdiction. It is also intended to show that this entity does not owe any outstanding taxes, fees or penalties to the state, that the entity has not filed for dissolution, has adequate registered agent service, and that the most recent annual reports have been filed with the state. It further shows that the entity is current with the filing requirements of the Secretary of State’s office.
If you are foreign qualifying a business in another state, a Certificate of Good Standing is usually a requirement. This proves to the jurisdiction that you are actually registered in your business entity’s home state, and that you abide by the rules of that jurisdiction.
When a business attempts to open a bank account or obtain financing, banks often require a Certificate of Good Standing. It is usually prudent to order your Certificate of Good Standing at the time you incorporate or form your LLC so that there will be no delays in processing your business banking accounts. Oftentimes, you might be asked to produce this certificate before signing a contract.