Certificate of Good Standing – What is it and Do you Need it as a Business Owner?
The document that establishes your company as a legally authorized entity to conduct business operations while providing evidence that your company is indeed a legitimate venture is known as the certificate of good standing.
Despite the certificate of good standing being needed, a certificate of good standing is not actually something every business has to have.
What is a certificate of good standing?
A certificate of good standing is a document that verifies that a company is correctly registered with the state, has paid all registration fees, has filed every document required, and is allowed by law to carry out activities of their business within the vicinity of the state they are registered with.
In other states, a certificate of good standing is also known as a certificate of existence or a certificate of status.
It is customary for a certificate of good standing to have an expiration date which would usually fall under the time when the business would need to renew their registration or when documents that are required to be submitted periodically are due.
A certificate of good standing could also have its expiration date fall under a day when fees such as what is incurred when registering are due.
A certificate of good standing normally expires when the calendar year ends or when the laws of the state would require periodic filings or renewal.
A company that was initially formed in a specific state can be issued a certificate of good standing as much as an entity that was formed in another state can but is currently registered within that specific state as a foreign entity.
It should be noted that a certificate of good standing is not an occupational or business license which is another requirement a company needs to have for it to be legally capable of conducting its business.
A company can legally operate in the state it registered with even when it does not have a certificate of good standing.
Here is an example of a certificate of good standing for an anonymous business in Arizona:
Who can get a certificate of good standing?
Because of the fact that a certificate of good standing is not required from every type of business entity since not every entity is obligated to be registered with the state, there will be certain business entities that would not be able to request for a certificate of good standing.
Individuals who are conducting their business on a sole proprietorship will not be obligated to register with any state.
Subsequently, there will be no need for sole proprietors to procure a certificate of good standing.
On the other end of the spectrum, every state in the US will require all limited liability companies (LLC) and corporations to be registered with them thus, all corporations and limited liability companies can get a certificate of good standing.
Different states will require certain kinds of business entities to register with them while other business entities do not need to, like how a partnership, limited liability partnership (LLP), or a limited partnership may need to register when established in one state but if established in another, no registration is necessary.
If the company you are establishing falls as either an LLP, partnership or limited partnership, the laws of your presiding state will dictate on whether or whether not registration would be required.
Where do I get a certificate of good standing?
The certificate of good standing is issued by the state agency where the company has been registered with.
In most cases, the state agency that issues certificates of good standing is the secretary of state.
In cases where it is not the office of the secretary of state that issues the certificate of good standing, it is most likely going to be one of its subdivisions that will issue the certificate instead.
The state agency where one could get a certificate of good standing is known by the following names depending on which state it is located in:
- Department of Commerce, Community and Economic Development – Alaska
- Arizona Corporation Commission – Arizona
- Division of Corporations – Delaware
- Business Registration Division of the Department of Commerce and Consumers Affairs – Hawaii
- Department of Assessments and Taxation – Maryland
- Corporations Division of the Secretary of the Commonwealth of Massachusetts – Massachusetts
- Corporations Division of the Department of Licensing and Regulatory Affairs – Michigan
- Division of Revenue and Enterprise Services of the Department of the Treasury – New Jersey
- Division of Corporations and Commercial Code of the Utah Department of Commerce – Utah
- State Corporation Commission – Virginia
- Department of Financial Institutions – Wisconsin
In the District of Columbia, the state agency that is in charge of issuing certificates of good standing is known as the Corporations Division of the Department of Consumer and Regulatory Affairs.
Information on how to be issued a certificate of good standing and how much that will cost can be found on the appropriate website of your state agency.
What is needed to get a certificate of good standing?
In most cases, a business entity will only need to be issued a certificate of good standing when it is asked to submit or show one.
Generally speaking, a business will only be asked to procure a certificate of good standing under two kinds of scenarios which are:
- The company is asked by an individual or organization with whom that company has a business relationship with for a certificate of good standing in relation to business associated matters. This is mostly what happens when a company would want to apply for credit under the name of its business, set up customer payment processing either through credit cards or debit cards, and when the company would like to open a bank account dedicated to its business.
- When applying to register a company as a foreign entity in another state, it is customary for the state to ask the company to obtain and submit a certificate of good standing from the state that the company was formed in.
In cases where a business entity is not obligated to register with the state, the business entity will be unable to procure a certificate of good standing though in these cases, the business entity would not need it.
In cases where a business entity has to be registered with the state or is already registered with the state, that business entity will only need to procure a certificate of good standing when it is requested to do so.
In these cases, the business entity can be issued a certificate of good standing from the state agency where it has been registered with or from the state agency where the business entity conducts business in as a foreign entity.
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