Good Standing

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What does “good standing” mean in a business sense? 
 

For business owners, being in good standing means that your business has accomplished all necessary regulatory and licensing requirements and that you have paid all applicable fees in the U.S. state where your business is. 

To prove that you are compliant, A Certificate of Good Standing is issued by the state agency where your business is registered. This document is important because it signifies that the business is legally registered with the state and allowed to do business. A Certificate of Good Standing is also called a “Certificate of Existence” or “Certificate of Status.” These terms are interchangeable, depending on what the state uses. 

Why is a Certificate of Good Standing important for businesses? 
 

Obtaining a Certificate of Good Standing is not considered a legal requirement in itself. This means that not all businesses are required to have this document. However, there are specific situations when you may be asked to present a Certificate of Good Standing.

It is typically required by financial institutions in processing loans, opening a bank account, and credit and debit card processing. Also, you will need this document when registering your business in another state. Finally, A Certificate of Good Standing may also be requested by investors. Keep in mind that a Certificate of Good Standing usually has an expiration date. It can usually be renewed every year by filing required documents and fees. 

Even if you don’t find yourself in a situation where a Certificate of Good Standing will be requested, it is best to maintain your organization’s good standing. If your business is unable to get this certificate because of “bad standing” with the state and its requirements, this will have a negative impact on your company. 

Here are examples of reasons why a business can lose its good standing status:

Who can issue a Certificate of Good Standing? 
 

A Certificate of Good Standing is issued by the same state agency that registers businesses. In the U.S., it is usually issued by the department of the secretary of state. 

What types of businesses can obtain a Certificate of Good Standing?
 

There are certain businesses required to register with the state that can obtain a Certificate of Good Standing. State laws may vary for other business entities such as: 

Sole proprietorships are an example of business entities that are not required to register with the state. If you are a business owner, it is best to verify your state laws for clarification.

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