The Importance of a Certificate of Good Standing

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Issued by the Secretary of State, a certificate of good standing is a document that confirms your company is authorized to do business in that particular state. It proves that your business is compliant when it comes to filing an annual report, as well as paying franchise taxes and state fees.

You don’t always need to have a certificate of good standing, but this document helps to establish your company as a legitimate venture and legally authorized to conduct business.

But don’t confuse a certificate of good standing with a business or occupational license. The latter must be obtained in order to legally conduct business. A company can legally conduct business in a state where it is registered without having to obtain a certificate of good standing.

Below is some very useful information that every business owner should know about certificates of good standing.

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Why do you need a Certificate of Good Standing?

Generally, a business only needs a certificate of good standing when it is asked for one. You will probably only be asked for a certificate of good standing in two situations:

  1. You are asked for one by an individual or organization with whom you have some type of business relationship. This is most likely when you want to open a business bank account, set up credit or debit card processing of customer payments, or apply for credit in the name of the business.
  2. You apply to register your business in another state as a foreign entity. To register a foreign entity, it is common for that state to require a certificate of good standing from the state where the company was formed.

If your business is not required to register with the state, you will not be able to obtain a certificate of good standing but nor will you need one. 

But whether asked to present one of not, the certificate of good standing—also called a certificate of authorization or certificate of existence—is vital for nine reasons:

  1. It enables you to open a business bank account and make certain bank transactions, including applying for a business loan
  2. Makes it easier to obtain financing from investors
  3. Required when applying for the foreign qualification (registering to do business in another state)
  4. Necessary to renew particular licenses and permits
  5. Vital when selling the business
  6. Useful when seeking business partners or applying for a government contract
  7. Required to be registered as a legal entity in your state
  8. Not be in default of corporate rules or suspended by the state
  9. Be current on all tax filings and obligations

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How to obtain a Certificate of Good Standing

Corporations, LLCs, limited partnerships and limited liability partnerships can obtain a certificate of good standing because these entities are registered with the state. The state is not able to issue a certificate of good standing to a sole proprietorship or general partnership because these types of businesses do not need to register with the state.

The state agency where your business is registered will issue a certificate of good standing. In most states, this is the secretary of state, or one of its subdivisions. The agency has a different name in the following states:

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  • -Alaska: Department of Commerce, Community and Economic Development
  • -Arizona: Arizona Corporation Commission
  • -Delaware: Division of Corporations
  • -Hawaii: Business Registration Division, Dpt. of Commerce and Consumer Affairs
  • -Maryland: Department of Assessments and Taxation
  • -Massachusetts: Corporations Division, Secretary of the Commonwealth of Massachusetts
  • -Michigan: Corporations Division, Dpt. of Licensing and Regulatory Affairs
  • -New Jersey: Division of Revenue and Enterprise Services, Dpt. of the Treasury
  • -Utah: Division of Corporations and Commercial Code, Utah Dpt. of Commerce
  • -Virginia: State Corporation Commission
  • -Wisconsin: Department of Financial Institutions
  • In the District of Columbia, it is the Corporations Division of the Department of Consumer and Regulatory Affairs.

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Information about how to obtain a certificate of good standing, and the fee involved, will be found on the agency’s website.

Obtaining a certificate of good standing is not a difficult process. The Secretary of State in your home state provides these documents in person, via phone, online, by email, by fax or by mail.

Some states will send you an original document to attach to your application for foreign qualification, while other states will ask you to print the certificate from an online account. Keep in mind that some states require original copies of certificates.

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In conclusion

Because the certificate of good standing shows that your business entity is legally authorized to do business and is compliant, it is a vital document to have whether you’re asked to present one or not.

Online legal services, such as Inc. Authority, can file a certificate of good standing on your behalf in all 50 states. And if your business is not in good standing, Inc. Authority can help you address your business issues and obtain reinstatement.