Even after the formation of your LLC or corporation, you will still require many different documents for various reasons. One of the most important is the “Certificate of Good Standing“.
Also known as “Certificate of Authorization” and “Certificate of Existence”, it is issued by the state in which your business is registered.
What is this certificate? Does every LLC or corporation need to have this certificate? All of this and much more discussed in the post below.
- What is a Certificate of Good Standing?
- Why LLC or Corporation Need the Certificate of Good Standing?
- What does Certificate of Good Standing – Include?
- Does a Sole Proprietorship Need a Certificate of Good Standing?
- How to Get a Certificate of Good Standing?
- Can the Secretary of State or Other Equivalent Agency Deny My Certificate of Good Standing Application?
What is a Certificate of Good Standing?
The Certificate of Good Standing is a state-issued certificate. It shows that an LLC or corporation is authorized to conduct business and meets the statutory requirements of that state. In simple words, it confirms that the business is legally registered in the state which grants it the certificate.
Apart from this, it also shows that your business has-
- Paid all the required fees to the state
- Paid franchise tax
- Filed annual report
Even an entity whose formation is in a particular state but wants to register in a new state as a foreign entity should also have the Certificate of Good Standing. The certificate comes with an expiry date before which the business should renew the certificate.
But note that the certificate is not similar to occupational or business license which is mandatory to conduct business in a state. State-registered companies which do not have this certificate can still conduct business in that state legally.
Why LLC or Corporation Need the Certificate of Good Standing?
While the certificate is generally not mandatory, many of the LLCs and corporations still need to get one for a number of reasons. Some common reasons are-
- Maintaining their own records
- State government requirement when using foreign qualifications
- Lender requirement when trying to acquire financing
- Set up a new business bank account
- Attract potential business buyers or companions in foreign countries
- Renewing some types of business permits or licenses
- Business promotion
What does Certificate of Good Standing – Include?
A Certificate of Good Standing usually includes the following information-
- Trading name and number of the company
- Incorporation or formation date of the company
- A statement which confirms that the company is in existence since its incorporation or formation
- Statement from Registrar which proves that the company is not in liquidation and is not subject to any kind of administration order
- Statement from Registrar to confirm that the company has not selected any receiver or manager of the company property
- Declaration by Companies House which affirms that there are no actions against the company to strike it off or make it invalid
Does a Sole Proprietorship Need a Certificate of Good Standing?
NO, A sole proprietorship is not a state registered entity. Thus, a sole proprietorship does not need a Certificate of Good Standing.
Apart from an LLC and corporation, some of the states also require limited liability partnerships, limited partnerships, partnerships, etc. to have a Certificate of Good Standing.
How to Get a Certificate of Good Standing?
Secretary of State or other equivalent agency which is responsible for maintaining state records and filing entities issues Certificate of Good Standing. For instance, the Divisions of Corporations issues the certificate in Delaware and State Corporation Commission is responsible for issuing this certificate in Virginia.
Even if your corporation or LLC is in existence for just a few days, you can still get this certificate.
You can know more about the documents you will need and the fee for applying at the official website of the agency that issues the certificate. There are also several 3rd party companies in almost every state that can apply for the certificate on your behalf.
Can the Secretary of State or Other Equivalent Agency Deny My Certificate of Good Standing Application?
Yes, it is possible for a state agency to deny your certificate application. Some common reasons due to which the state agency may not issue a certificate are-
- The Confirmation Statement or accounts of your company are not up to date
- You have not provided information regarding the control, ownership, or constitution of your company
- The company does not have the required number of officers
Businesses which register at state-level such as LLCs and corporation can get themselves the Certificate of Good Standing as and when needed. The certificate is not mandatory if an entity only conducts business in the state where it is formed. But a large number of enterprises still get the certificate due to many reasons as discussed above.
If you want to apply for the certificate, visit the state agency’s office of your state to know more about the application process and fee. You can also work with a 3rd party company which will prepare and file all the documents necessary for the certificate on your behalf.