What is a Certificate of Good Standing?
Janet Schaaf is a freelance writer, editor and proofreader who considers reader advocacy to be her calling. After taking a few roads less traveled, Janet completed a bachelor’s degree in English Literature from the University of Missouri-Kansas City, with English Department Honors. She has been correcting grammar and checking facts since she could string a sentence together. For the past three years, Janet has focused on making personal finance topics understandable and relatable. Loan terms and credit card agreements can look overwhelming, but understanding what you’re agreeing to is paramount in grasping the impact debt can have on your life.
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Your business may need a certificate of good standing for certain business actions, such as opening a business bank account, applying for a business loan or selling your business. If your company repeatedly fails to pay taxes or file required paperwork, your state may revoke your right to operate.
Here’s everything you need to know about certificates of good standing and how to get one in your state.
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The meaning of a certificate of good standing
A certificate of good standing shows that your business entity complies with your state’s business regulations and has no outstanding tax accounts. Other names for this document include:
- Letter of Good Standing
- Certificate of Legal Existence
- Certificate of Authorization
- Certificate of Status
A good standing certificate differs from a business license, which is typically needed to start a business. Some states impose an expiration date for certificates of standing, whereas others leave it open-ended. However, if your business entity changes, you must apply for a new certificate. Furthermore, some organizations and lenders require certificates issued within a specified time frame, such as the past 30 to 60 days.
You may have to pay a nominal fee for a certificate of good standing — typically no more than $50.
The exact information in your certificate of status varies from state to state. But, it generally includes the business name, entity type and whether the business is active and authorized to conduct business within the state.
Some states include additional details. For instance, the Nevada Secretary of State website provides sample certificates of existence with the option to list all organizational documents on file for your company.
When business owners need a certificate of good standing
A certificate of standing isn’t required for all business types. For example, if you operate as a sole proprietorship, you do not need to register your business with the state. Because of this, sole proprietors can’t request a certificate of good standing.
However, all states require you to register corporations and limited liability companies (LLCs), with some states requiring registration for certain business partnerships. Therefore, certificates of good standing are typically needed for these types of businesses.
However, business owners don’t always need an up-to-date letter of good standing on file. Here are the most common situations when you might need to provide a certificate of good standing:
- Opening a business bank account
- Applying for a small business loan
- Purchasing business insurance
- Conducting business outside your home state
- Acquiring business investors or partners
- Obtaining or renewing business licenses and permits
- Transferring or selling your business
How to get a certificate of good standing in your state
You can typically request a certificate of good standing from your state’s secretary of state office, which should list any required paperwork and associated fees. However, your state office may deny the certificate if your business reports and business taxes are not in good standing.
Here is where you can request a good standing letter from each state and the District of Columbia:
Alaska
Arizona
Arkansas
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Frequently asked questions
In general, you do not need a certificate of good standing to start and operate your business. However, you will likely need a letter of good standing for specific business purposes, such as to open a business bank account, apply for a business loan or transfer ownership of your business.
Furthermore, some states may require a certificate of good standing for certain business licenses and permits. For example, you must have a valid certificate of good standing to obtain a liquor license in Rhode Island.
Expiration dates for certificates of good standing vary by state. Typically, your certificate will be valid for 30 to 90 days, although some states don’t impose an expiration date. Keep in mind that banks, creditors and investors may set their own deadlines.
Regardless of whether you need a certificate of good standing, keeping your business in compliance with your state’s regulations and rules is critical. The state agency may make involuntary status changes if your business doesn’t maintain good standing. For example, you could end up with a public record of delinquency, leading to your business entity being dissolved against your will.