A business, no matter which state it is located in, has to look after certain matters. A business needs to ensure that it complies with state regulations and fulfills all necessary requirements.
This is important to maintain a business’s ‘good standing’. If the business is in good standing it can obtain a certificate of good standing from its state’s filing agency. But why?
This article will take you through the details of a certificate of good standing, reasons to have it, and the process through which you can get one from your state.
What Is a Certificate of Good Standing?
A certificate of good standing is a document issued by the Secretary of State certifying that your company is registered and authorized to conduct business in your state.
The certificate of good standing signifies that your company complies with all state regulations. These may include filing all necessary documents such as annual reports, paying taxes, and other registration fees.
As an HR professional, you may ask “What is a certificate of existence” as you may have come across this question often. To put it simply, it is another name for a certificate of good standing. It is often referred to as a certificate of authorization, letter of good standing, and business certificate of good standing. However, it is most commonly referred to as a certificate of good standing.
Companies formed in the state and those formed in another state but registered as a foreign entity are both entitled to a certificate of good standing
A certificate of good standing comes with an expiration date and expires in the following situations:
- When a company is due to get its registration renewed
- When a company’s taxes or other state fees are due
An important point to remember is that a company is not required to have a certificate of good standing to legally conduct business activities in a state. Therefore, it can do so without being issued this certificate.
A company requires a certificate of good standing only under certain circumstances which are explained in the next section.
Reasons to Get a Certificate of Good Standing
As mentioned earlier, a company doesn’t need to have a certificate of good standing. Most companies get it issued for their own records. However, you need to know the reasons for which your company might need one.
Below is a list of situations under which your company might want to get a letter of good standing from the Secretary of State:
- applying for business loans
- opening a business account with a bank or carrying out other transactions
- requiring small investments for business
- forming a contract with another company or supplier
- registering your company in additional states to grow business
- forming partnerships
- renewing business licenses
- selling the business
- merging your company with another
Do I Need a Certificate of Good Standing?
Not all business entities require a certificate of good standing.
If you are a sole proprietor, you do not need to apply for a business certificate of good standing or register with your state. Hence, you can continue to conduct business activities without impediments.
However, if your company is organized as a corporation or a limited liability company, then you may need to apply for one.
Requirements for a certificate of good standing vary with the state your company is established in. Some business entities such as limited partnerships limited liability limited partnerships and limited liability partnerships may or may not require a business certificate of good standing depending on the state’s regulations.
How to Get a Certificate of Good Standing?
The process of getting a letter of good standing is easy. Although every state has distinct requirements and protocols, most states generally take up to a week to issue the certificate.
You just have to go through a few steps to obtain a certificate of good standing for your company.
Check if your business is required to register with your state
In case you’re not sure whether your business entity needs to be registered or not, you can always check in with your state’s filing agency.
Ensure your business complies with state regulations
A business certificate of good standing will only be issued if your company has fulfilled all state requirements. These may include paying all dues and taxes, filing all necessary documents including annual reports, and legal authorization to conduct business activities.
Request your state’s filing agency to issue a certificate of good standing
These certificates are normally issued by the Secretary of State but in some cases, the filing agency can also issue one.
You have the option of requesting your certificate of good standing via email, mail, online, fax, or in person.
You have to pay a fee to get your certificate. The fees vary depending upon the state and the type of business entity you operate.
Importance of Maintaining a Certificate of Good Standing
Maintaining a certificate of good standing is similar to maintaining a good reputation among your peers.
You wouldn’t want your friends to question your credibility and sever ties with you.
Likewise, your business may have the same aspirations. It intends to expand its operations, establish connections within the business community and enjoy certain rights that the state has to offer.
As an HR professional, you may want to stay informed about the significance of maintaining a certificate of authorization and the consequences if done otherwise.
The Need
Like any other business, yours may also want to grow and reach new heights. This could mean introducing new products, growing the customer base, or branching out to other states or countries.
In the case of the latter, your business will have to register itself as a foreign entity. For instance, if you are originally based in Ohio and intend to open up a new office in New York you will be required to present a certificate of existence.
Some states may require you to present a letter of the certificate that expires within a short span such as 90 days. This is their way of knowing if you have remained compliant with your state of formation. In that case, you have to be mindful of when your certificate needs to be renewed.
For that, you can hire a full-service agent who can monitor your entity and keep you updated about any status changes that may occur.
The Consequences of Not Having One
In case your business fails to comply with the state’s regulations, it may be fined. This can adversely impact your company’s credibility and authority.
In a situation where you would like to make your business’s presence in another state or country, your company might have to face challenges and resistance.
Failure to comply can also result in a company becoming void, revoked, or dissolved altogether. The company could also lose its limited liability protection. When a company is no longer protected by the state authority, it can easily be taken over by another entity.
Another problem that your entity could face is losing access to state courts and becoming prone to identity theft. Losing a good standing means putting your company’s website, personal information, and identity at a risk.
Therefore, it is suggested that you keep a monthly check on your entity’s status and stay informed about your state’s regulations.
How to Obtain a Certificate of Good Standing in your State?
The tables below will give you basic information about your state’s issuing authority, the fee structure to get a certificate of good standing, and what it includes.
Ohio
| Issuing authority | Ohio State Department |
| Fees |
|
| Time duration |
|
| Content of the certificate |
|
Delaware
| Issuing authority | Division of Corporations at the Delaware Secretary of State |
| Fees |
|
| Time duration |
|
| Content of the certificate |
|
Illinois
| Issuing authority | Department of Business Services |
| Fees |
|
| Content of the certificate |
|
Maryland
| Issuing authority | Corporate Charter Division |
| Fees |
|
| Time duration |
|
| Content of the certificate |
|
New Jersey
| Issuing Authority | Secretary of State |
| Fees |
|
| Time duration |
|
| Content of the certificate |
|
New York
| Issuing Authority | State of New York Department of State |
| Fees |
|
| Time duration |
|
Texas
| Issuing Authority | Texas Secretary of State |
| Fees |
|
| Time duration |
|
| Content of the certificate |
|
Colorado
| Issuing Authority | Colorado Secretary of State |
| Fees |
|
| Time duration |
|
| Content of the certificate |
|
California
| Issuing Authority | California Secretary of State |
| Fees |
|
| Time duration |
|
| Content of the certificate |
|
To apply for a certificate of good standing in other states:
Take a Step Forward
Having a certificate of good standing will benefit your company in multiple ways. It is a good practice to stay compliant with your state’s regulations so that at no point should you face obstacles in growing your business.
From an HR standpoint, you should stay informed about the process and make sure that your company stays compliant.
