What would you say if I asked you if your business is in good standing with your state? You can’t answer that if you don’t have a certificate of good standing.
Although not always necessary, a certificate of good standing is an essential document for growing businesses. Having this document ready to go makes it easier to apply for a business loan, open a bank account, or compete for a government contract.
The even better news? Getting a good standing certificate is super simple and inexpensive. Before we get into all that, however, you should know the basics of a certificate of good standing.
What Is a Certificate of Good Standing?
A certificate of good standing is a state-approved written document that indicates, as of a certain date and for a certain period, your company is properly registered with the state and authorized to conduct business.
It has various names too, like:
- Letter of Good Standing
- Certificate of Existence
- Certificate of Authorization
- Certificate of Facts
- Certificate of Status
This document is authorization proof that confirms you have the legal permit to do business in your state, and you follow all state requirements, including submitting the necessary paperwork and paying fees and taxes.
Put simply, a good standing certificate proves you are indeed a legit business. That said, it isn’t mandatory for every business, and nor does it need to be publicly displayed.
The Basics of a Certificate of Good Standing
In this section, I’ll discuss the basics of a certificate of good standing to help you understand the nuances related to this specific document.
Basic Information Elements
A certificate of good standing isn’t a one-size-fits-all document. While there’s some variability, it does have some primary elements.
The document covers your company name, chosen business entity, the date of commencement of your business, and the authorizing state. You’ll also need the seal and signature from the Secretary of State to make it official.
Long-Form vs. Short Form Standing Certificate
Another important thing to make note of is the difference between long-form and short-form standing certificates.
A long-form certificate of good standing confirms a company’s status while listing all documents on file. However, certified copies of these documents aren’t automatically attached and must be requested with the certificate (if needed).
On the other hand, a short-from or the standard certificate of good standing simply verifies a company‘s existence and status without listing the documents filed.
Most states don’t issue “good standing certificates” that attest to the status of the company. Instead, they only issue certificates that certify the company exists in the state’s records—nothing else. Hence, you should always read the certificate you receive to understand what the state is certifying.
Business Entity Eligibility
Only business entities that must get themselves registered with the state are eligible to request a certificate of good standing. Therefore, if your business structure doesn’t require registration, you won’t be able to obtain the document—but then again, you won’t be needing one too.
In all states, sole proprietorships aren’t required to register, whereas corporations and limited liability companies (LLCs) are. Besides these, there are several other types of business entities—partnership, limited liability partnership (LLP), limited partnership, and limited liability limited partnership (LLLPs)—but whether they would need to register will vary from one state to another.
Requirements Fulfillment
Every business must fulfill compliance requirements to stay in good standing, regardless of their home state. However, these requirements and responsibilities vary from state to state and entity type.
Here’s a list of common requirements that can help you stay in good standing with your state:
- Paying taxes—federal, state, and local income tax, sales tax, franchise tax—on time
- Following local zoning and permitting requirements
- Maintaining a registered agent
- Filing an annual report and submitting mandatory paperwork
- Following all corporate rules and regulations, including maintaining a board of directors, following bylaws, holding required meetings and repairing minutes, and so on
- Keeping business and professional licenses current
If you’re ever unsure about your business’s standing, many states offer online checking facilities. Alternatively, you can consult a business attorney for legal advice and an accountant for tax advice.
The Secretary of State office is another place to get detailed information.
Document Cruciality
Agencies and organizations may need a certificate of good standing at different times during their existence. Here’s a list of reasons why different entities may require one:
- When a company wants to secure financing
- For opening a new bank account or applying for a business loan
- When completing a contract or other business-related transaction
- When applying for foreign qualification since some states don’t allow companies to carry out business within their boundaries if they aren’t in good standing with their state of origin
- For renewing business licenses and permits
- For ensuring your business
- To woo potential business partners to make strategic partnerships—or potential clients if you plan to sell the business
- When applying for a government-backed loan or a federal government contract
- To set up a system that lets you process credit or debit payments
Certificate Obtainment Process
Depending on your state, you’ll get the certificate of good standing either from the Secretary of State office or the Department of Licensing and Regulatory Affairs. Applying online is another option.
You’ll receive an email with the certificate once your application gets approved. If you don’t, you’ll get a link to print the document online. The whole process takes about 7-14 business days.
In case you want hard copies, you can issue a request for them for an additional fee.
5 Tools to Improve Filing for a Certificate of Good Standing
Online legal services can help you file for a certificate of good standing in all 50 states for about $50-$100, plus state fees. What’s more, these companies even help you address problems and reclaim your good standing (through a process called reinstatement) if the need ever arises.
Here’s a list of a few business formation services for you to consider:
LegalZoom
LegalZoom is one of the most well-known business formation services, having served over 4 million customers.
Thanks to its aggressive advertising style, it enjoys more brand power than most of its competitors. It can easily handle large volumes of LLC formations, as well as other different entities.
LegalZoom offers an excellent offering list, including a certificate of good standing. Additional services like business licenses, federal tax ID (EIN), seller’s permit, and 501(c)(3) applications are another plus.
The extended customer support service can be particularly life-saving for busy entrepreneurs. LegalZoom packages start at $79, plus filing fees.
Incfile
If you’re looking for an affordable business formation service with an excellent reputation in the market, look no further than Incfile.
Several people on my network highly recommend this service for its impressive offerings at a shocking cost of $0 (for the first year).
You see, Incfile offers a full year of registered agent service for free in all packages, after which you’ll be charged $119 per year, an amount that’s still cheaper than other business formation services. Keep in mind that the base subscription plans vary from state to state.
Incfile plans include services like name availability verification, online status tracking, next-day processing, and article prep and filing. Certificate of good standing is a part of Incfile’s premium add-ons that you’ll have to purchase separately from the base plan
LegalNature
Whether it’s forming a new business, carrying out day-to-day operations, or managing employees, LegalNature is sure to set you up for success.
Although more renowned for its legal documents, covering a wide range of categories, the service also provides some excellent business formation services. It can completely take over the formation process, regardless of whether you want to start an LLC, C-Corp, S-Corp, or a non-profit.
In addition to document handling, LegalNature also offers certificates of good standing, articles of dissolution, EIN, articles of amendment, and registered agent services, among other services.
Services start at $40 for business formation and $84 for legal document plans. But you have to pay extra for additional services, starting from a $20-one-time fee for certified copies and $125 annually for registered agent services.
ZenBusiness
ZenBusiness is a household name in the business formation niche and enjoys a long track record of happy and satisfied customers.
True to its name, ZenBusiness tries to make starting a business a completely stress-free experience. It adopts a unique approach, where the company leverages technology and automation to simplify the LLC and Corp filing process.
ZenBusiness has an extensive offering list, covering LLC services, registered agent services, incorporation services, as well as DBA, EIN services, good standing certificates, and business name reservation.
While the pricing starts as low as $49 every month, excluding state fees, getting a certificate of good standing will cost you an additional $75, plus state fees.
Inc Authority
If you plan on forming an LLC, I highly recommend using Inc Authority to set up your company.
The reason? Well, firstly, the LLC services are 100% free. All you need to do is pay the state fees, and you’ll be done.
Secondly, while you create your free LLC, you get access to tons of amazing services, including free registered agent for a year, business name check, tax planning consultation, digital document storage, Form 2553 preparation and filing, and entity formation document handling.
As for a certificate of good standing, not only can Inc Authority help you file the document on your behalf in all 50 states, but it can even help you obtain reinstatement by addressing your business issues.
3 Tricks for Obtaining a Certificate of Good Standing
As mentioned before, getting a certificate of good standing isn’t that difficult—provided you know how to proceed and select the right online legal service. Below, I’ll detail three tricks to make the process even easier.
Ensure Your Business Satisfies All Requirements
The whole point of getting a good standing certificate is to confirm your business is “in good standing.“ Generally, staying up-to-date with your states compliance requirements involves the following:
- Following federal, state, and local licensing guidelines (e.g., health permits and building permits)
- Registering for different forms of states tax
- Filing a periodic report that summarizes your business’s finances — or a simple update of your company’s basic information.
While the requirements will vary by state, the essence remains the same: you must pay all your taxes and fees and file the required documents.
Understand the Reinstatement Process
Complying with the predetermined rules and regulations allows you to stay in the good graces of the state, which, in turn, will make your life less stressful and problematic. However, one cannot rule out the possibility that your business may fall out of good standing.
If that’s ever the case, you should know there are ways to regain a favorable status by getting your company reinstated. The reinstatement process varies from state to state, but the general outline is as follows:
- Find out the reason why your company fell out of compliance.
- Submit a reinstatement form to the Secretary of State office (or the appropriate agency) on behalf of your company.
- Clear all your outstanding taxes, fines, and fees before filing all the required compliance paperwork.
Keep an Eye Out for the Certificate’s Validity
If you want to conduct business in a state you aren’t registered in, you have to apply for registration as a foreign entity in that state and provide a certificate of good standing from your home state.
The thing is certificates of good standing have state-wise expiration dates that also vary based on your purpose.
The certificate is generally valid for up to 90 days, but that may not always be the case. Therefore, you should always keep an eye out for how long your certificate of good standing is valid before filing.
Here’s a brief rundown of the different states’ approved timeframes:
- Less than 30 days: Arkansas, Michigan, New Jersey, New Mexico, South Carolina, Vermont, Washington D.C., Wyoming
- Less than 60 days: Arizona, Hawaii, Illinois (for LLCs), Indiana, Missouri, Nebraska (for Corps), New Hampshire, Oklahoma, Oregon, Rhode Island, Tennessee, Wisconsin
- Less than 90 days: Connecticut, Florida, Georgia, Idaho, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Nevada, North Dakota, Ohio, South Dakota, Washington
- Less than 6 months: California, Delaware, Mississippi, Montana, Nebraska (for LLCs), North Carolina
- Less than 12 months: New York, West Virginia
Note: Alabama, Alaska, Colorado, Kentucky, Minnesota, Pennsylvania, Texas, Utah, and Virginia don’t require a certificate of standing for LLCs.
What to Do Next
I’m going to go ahead and assume you filed a certificate of good standing for a reason. This can be anything from the list we discussed above—opening a business bank account, applying for a business loan, or renewing your business license.
Naturally, your next step after securing the certificate of good standing should be considering why you needed it in the first place.
If you wanted to apply for a business loan, for instance, you’ll have to submit the document, along with the other required paperwork, to the bank. Similarly, if you wanted to sell the business, you must show the certificate to prospective buyers, proving you are indeed a legitimate business that complied with the law.
Want to learn more about running a business? Check out these Quicksprout guides:
- https://www.quicksprout.com/how-to-write-a-business-plan-for-your-startup/
- https://www.quicksprout.com/social-media-for-small-business/
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