A successful business is built on reputation, and also abides by important regulations. A certificate of good standing demonstrates both of these aspects. Most business owners will be asked to provide a certificate of good standing at some point. We’ll explain how to get one and when you’ll need to use it.
In this article, we’ll continue to refer to it as a certificate of good standing as it’s the most common name. In most cases, your Secretary of State office will issue your certificate.
Although there’s some variability, every certificate has a few primary elements. A certificate of good standing typically includes your business name, type of business entity, the date your business was formed, the state where you’re authorized, and the Secretary of State’s seal and signature.
Whether or not you need a certificate of good standing — or have the ability to get one — depends on your business entity.
When you register your company, you’ll choose the business structure that best suits your needs. Some business entities can get a certificate of good standing, and others can't.
Here are the businesses that can request a certificate of good standing:
The reason these businesses can get certificates is because they're required to register with the state. From that point, the government is tracking their compliance with state regulations. The state can easily verify whether these businesses are active.
On the other hand, businesses that aren't required to register cannot get a certificate of good standing. If you own a sole proprietorship, for example, you won't be able to demonstrate good standing in this way. In the U.S., sole proprietorships don’t have to be registered. However, there are other documents you can use to verify that your business is compliant.
If you discover that you need a certificate of good standing, follow the steps below.
There are a couple of ways to get a certificate of good standing. You can work directly with your state government using their website or mail services. Or, you can choose a paid online legal service like LegalZoom, which will file documentation on your behalf. This is also known as using a "registered agent."
If you aren’t a sole proprietor and you’re being asked to supply a certificate of good standing, there are two likely scenarios:
If you’re in the latter group, you need to register before applying for your certificate. The Secretary of State office is typically responsible for this process. Here’s an overview of how to register a business:
If you do business in more than one state, also known as a "foreign entity," you may need to register there as well. Many states will request that you show a certificate of good standing from your "home state," the state where you formed your business. Then, you can get your foreign qualification.
“Good standing” generally means that you’re up to date on your state taxes and fees. It verifies that you’ve accurately provided all the requested documentation. Depending on the state, you may need to file an annual report as well. This report provides a comprehensive breakdown of your business activities. It includes financial data, market segment information, new product or service plans, and more.
Good standing also refers to the fact that your business has existed continuously since the date you registered it. Together, this information proves that you (and your business partners) are authorized to sell goods and services in your state.
Fortunately, there’s a way to check your firm’s standing before you mail off documents and pay fees. Most state filing agencies have a business entity database on their website. There, you simply type in your business name (the legal name, not the DBA). You should see your current status and which tasks, if any, you need to complete.
Even if you think you’re in good standing, don’t skip this step. You could easily discover a mistake by the state that needs to be rectified.
Request a certificate of good standing from your Secretary of State office, or the equivalent government agency or subdivision in your state. (In Delaware, for example, you go through the Division of Corporations.)
As we mentioned earlier, you can handle this process on your own. It's fairly easy because you're only requesting a document — you should have already registered your business and double-checked your standing.
You can request your certificate online or by phone, mail, email, or fax. Using agent services is another option, and could save you some time.
In any case, you'll pay a filing fee. The amount is determined by your specific state agency. For example, it's $25 in New York, but only $11.50 in Idaho.
Getting your certificate online is the fastest method. After you pay your fee, it's usually available to download right away. You may also receive a certified copy by mail in several business days.
It’s also worth noting that some state certificates have an expiration date. Yours could expire after one year or just one quarter. But keep in mind that you don't need to have a certificate of good standing on hand at all times. In fact, lenders, creditors, and investors often ask for certificates of good standing that are less than 30 or 60 days old.
A certificate of good standing protects your business in many ways. For instance, LLCs are required to keep business finances and personal finances separate. But banks will want to see your certificate before you can open a business bank account. Each day you're mixing your finances, you put your business at risk.
Equally, your good standing will open a lot of doors. Having a valid certificate of good standing allows you to:
If you lose your good standing, it damages your ability to do business. Fortunately, the same online legal services that can help you request a certificate can also provide guidance on getting your good standing back.