Good Standing

When a Limited Liability Company (LLC) or corporation is in “Good Standing,” it means the business is legally compliant with the state agency where it is registered. This status acts as proof that the company is active, has paid its required state fees, and has submitted all mandatory documentation.

Maintaining this status is essential for a business to legally operate, enter into contracts, and grow.

How to Maintain Good Standing

To keep your business in Good Standing, you must consistently meet your state’s compliance requirements. While these vary by jurisdiction, the most common obligations include:

1. Filing Annual Reports: Submitting your Periodic or Annual Report on or before the state deadline.
2. Paying Franchise Taxes: Paying all required state business taxes, franchise fees, or minimum entity taxes.
3. Maintaining a Registered Agent: Ensuring your business always has an active, reachable Registered Agent with a valid physical address in the state.

If a business fails to meet these obligations, the state will change its status to “Delinquent,” “Not in Good Standing,” or eventually “Administratively Dissolved.”

What is a Certificate of Good Standing?

A Certificate of Good Standing (sometimes called a Certificate of Existence or Certificate of Authorization) is an official document issued by the state (usually the Secretary of State). This certificate serves as conclusive evidence that your business exists and is compliant with state laws as of the date it is issued.

When Do You Need a Certificate?

Business owners frequently need to order a Certificate of Good Standing from their state for several critical administrative tasks:

• Opening a Business Bank Account: Many banks require this certificate to prove the business is active before opening accounts or extending lines of credit.
• Securing Financing or Investors: Lenders and investors need to verify that the company is legally sound and not facing administrative closure.
• Foreign Qualification: If you want to expand your business and register to operate in another state, the new state will almost always require a Certificate of Good Standing from your home state.
• Selling the Business: Potential buyers will require proof that the entity is active and free of state-level compliance liabilities.

How to Check Your Status

You can easily verify whether your business is in Good Standing by conducting a business entity search on your state’s official Secretary of State website. The public record will display the current status of the entity, allowing you to catch and fix any compliance issues before they result in penalties.