A Certificate of Good Standing is a document issued by the government that certifies that a business has filed all reports and paid the necessary fees with the Secretary of State’s office.
By Brad Nakase, Attorney
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An organization can lawfully do business in a state provided they have a certificate of good standing, which proves that they have registered correctly, paid their state registration fees in full, and filed all necessary documents. In certain states, it is referred to as a certificate of status, existence, or compliance.
There is normally a date on a certificate of good standing that corresponds to when the registration is up for renewal, when periodic paperwork or payments are due, or both. Depending on the state, this may be at the end of the year or at any point throughout the year when renewal or periodic filings are required by law. The asking party (e.g., a bank) may have different standards (e.g., that the certificate be 30 to 90 days old) for this.
Any business, whether it was established in the state or registered as a foreign organization elsewhere, can be granted a certificate of good standing.
Contrary to what is required to lawfully engage in business, a certificate of good standing is not an occupational license. Even without a certificate of good standing, a registered business can lawfully engage in business within the state in which it is located.
Please contact our California business attorney to help you get a Certificate of Good Standing.
A certificate of good standing isn’t something you have to carry around with you at all times, but there are a few scenarios in which it can be useful. When does your company require a certificate of good standing? Here are a few situations.
1. Funding for businesses and loans
Lenders typically request a certificate of good standing from applicants seeking business loans or other forms of financial support as evidence of the status and compliance of the company in question. If you’re looking to open company bank accounts, attract new investors, or provide evidence during a financial audit, it might be required.
2. Branching out to further states
It is common practice to register as a foreign entity if a firm moves or expands into a new state. If you want to make sure your business is in compliance with the rules in your home state, you’ll need to provide a certificate of good standing with your application.
3. Partnerships and contracts
Any major contracts or new company partnerships may necessitate a certificate of good standing. Clients and business associates may ask to see this document as proof that your firm may lawfully operate in your state and meet its financial and legal commitments.
4. Renewing licenses for businesses
Renewal of specific business licenses or permits may be contingent upon obtaining a certificate of good standing from certain jurisdictions. The specific requirements for renewal may vary by jurisdiction, but this will guarantee that your company remains in compliance with all laws and regulations in effect at the time of renewal.
5. Buying and selling
A certificate of good standing is a typical request from prospective purchasers during the due diligence process when transferring ownership or selling an organization. It might reassure them that your business is in full compliance, which can make the deal go more smoothly.
Any of the following legal entities can normally apply for a certificate of good standing:
Not all businesses can acquire a certificate of good standing since not all businesses are obliged to register with the state. Sole proprietorships and general partnerships, for example, are exempt from state registration requirements and, consequently, cannot get certificates of good standing. Corporations and limited liability companies (LLCs) are required by law in every state to register in order for these entities to be able to get a certificate of good standing.
Some states require the registration of certain types of business entities while others do not. The following types of partnerships fall under this category: general partnerships, limited partnerships, LLPs, and LLLPs. Whether or not your company has to be registered depends on the legislation of your state in which it is based.
Obtain a certificate of good standing from the state agency that oversees your company’s registration. The SOS or a subset thereof is responsible for this in the majority of states. Since the application processes are subject to change, it is essential to verify with your state authorities, as the agency goes by a different name in some states. Each agency’s website will include information on the price and how to receive a certificate of good standing.
A certificate of good standing is often only required of businesses upon request. A certificate of good standing will likely only be requested of you in two scenarios:
An individual or company with whom you do business has requested one from you. If you wish to establish a business bank account, accept payments via credit or debit cards, or apply for a loan in the company’s name, you will likely need to do this.
In order to register your company in a different state, you must do so as a foreign organization. State certificates of good standing from the state of incorporation are often required when registering a foreign entity.
No certificate of good standing is necessary or even possible for company structures that are exempt from state registration requirements, such as sole proprietorships. When asked for proof of good standing, a registered business just needs a certificate of good standing. You may then get it from the state agency in the state where your company is registered or from the state agency in the state where you are conducting business as a foreign entity.
You must first determine which state government body is responsible for issuing certificates of good standing. As mentioned before, this is often a subdivision or your state’s SOS office.
The next thing to do is to request a certificate by following these instructions.
Make sure your company is in complete compliance with all state requirements before you apply for a certificate of good standing. This would include the following:
Before moving on, make sure you’ve checked your company’s status and taken care of any compliance issues. Go to your state’s office or consult a company attorney if you need help figuring out what to do or have concerns about being in good standing.
When you’re prepared to submit a certificate request, you may do the following:
Collect all required data. In most cases, you’ll have to give your company’s name and registration number (along with anything else your state requires).
Pick the way you want to apply. You might be able to apply in person, by mail, or online depending on your state’s policies. Keep in mind that the certificate will take time to process, and that there will be extra waiting involved if you submit your application through the mail.
Send in the money. The amount of the upfront fee might vary from zero dollars to fifty dollars or more, depending on the jurisdiction.
Be sure to check your state’s official website for the most current criteria, since certain jurisdictions may have unique procedures or demand extra information.
After sending in your application, you’ll have to wait for your certificate to be received and reviewed. You could get your certificate in a few days or a week in certain areas, but it could take a lot longer in others. There may be an option to request expedited processing if you want your certificate fast, but it comes at a higher price.
1. How much does a certificate of good standing cost?
In most states, you may get a certificate of good standing for anywhere from zero dollars to fifty dollars. You should contact your state for official price information, as it varies according on the application method (in-person, online, or by mail).
2. What does a certificate of good standing contain?
Name, entity type, and authorization to operate are the usual components of a certificate of good standing for a business. Additionally, it might indicate that you have paid all applicable fees and taxes, submitted all appropriate reports, and that there are no outstanding disputes or problems.
3. When does a certificate of good standing expire?
Once you have paid the proper filing or fee, your certificate of good standing will typically be valid until the end of the calendar year or until another period specified by state law. The person who wants the certificate may, however, ask for a more current copy, which is usually one that was given in the past 90 days.
4. Which branch of government issues certificates of good standing?
State governments, not the federal government, are typically responsible for issuing certificates of good standing. However, the Secretary of State (SOS) office or an equivalent body in each state is responsible for providing these certificates in accordance with its own procedures. Certificates from each applicable state may be required if your business operates in more than one state.
5. Can I obtain a certificate of good standing without my articles of organization?
When applying for a certificate of good standing, articles of organization are usually not required. Then again, the articles may include information that is relevant to your application, so it’s a good idea to have them handy.
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