A "Certificate of Good Standing" is also often referred to as a "Certificate of Authorization" or a "Certificate of Existence," and this certificate is used by companies and businesses (incorporations and/or LLCs) in order to prove that they are incorporated and are thereby legally permitted to complete business in a specific state or area. In addition, a Certificate of Good Standing also illustrates that the company or business does not: owe the state any taxes, fees or other penalties; the corporation or LLC has not filed for dissolution and has a sufficient registered agent service in place; and the company is current with all of the Secretary of State's filing requirements.
What Is the Meaning of Good Standing?
A business entity is considered to be in "Good Standing" if the company or business (i.e. corporation or LLC) has filed all of the appropriate paperwork with the Secretary of State. The entity will have also needed to pay any applicable fees that are due.
When Do I Need A Certificate of Good Standing?
Oftentimes, when you are trying to open a bank account for your company or business, or if you are trying to obtain any type of financing, the bank will ask you to provide a Certificate of Good Standing. In addition, if you are trying to expand your company into other states, you will also need to provide a Certificate of Good Standing to each of the states in order for you to register to do business in those states. Oftentimes, it is highly suggested that you apply for your Certificate of Good Standing at the same time that you are forming your LLC or corporation, as this will ensure that they are no delays in processing your business banking accounts.
Why Is 'Good Standing' Important?
Keeping your corporation or LLC in "good standing" is imperative, and it is essential for any business. Without this, you will not be able to open a business banking account, obtain any type of financing for your business, or apply for (or renew) any business licenses and permits that you might need in order to conduct business. In order to maintain good standing, your company must comply with all of the state laws and submit any necessary paperwork or payments by the appropriate deadline. Falling out of good standing can be surprisingly easy, as this can happen if you fail to file an annual report or miss an annual payment. One of the most important reasons to retain good standing for your company is the fact that this will also preserve you (the owner of the business) from any personal liability for any actions taken by the corporation or the LLC.
How Do I Maintain Good Standing?
You can maintain good standing fairly easily. All you need to do is make sure that you remain in compliance with your state's laws. There is often an annual report that you will need to complete, as well as specific filing requirements for each state that you choose to form and register your company (thus allowing you to do business in that state).
How Can I Demonstrate That My Company Is In Good Standing?
In order to demonstrate that your company is in good standing, you are able to order a "Certificate of Good Standing" on behalf of your company from the state. This certificate is also referred to as a "Certificate of Existence" or a "Certificate of Status," depending on the state in which you are registered. These documents simply state that your company or business is in good corporate standing (meaning that you have filed the required annual report, and you have paid all of the necessary state fees and taxes).
Bottom Line: Maintaining a company or business that remains in good standing is imperative. Without being in good standing, it will be difficult for you to conduct any business at all, meaning that at the end of the day, you might not have a business to run.
