A company is said to be in "Good Standing" if it has filed all required state reports, obtained all necessary licenses and permits, paid all required state taxes and fees, and otherwise complied with all applicable laws and regulations. A certificate of good standing, in essence, is evidence of the existence of a company.
Who is Eligible for a Certificate of Good Standing?
Not all business entities can obtain a certificate of good standing because not all business entities are required to register with the state. Some states require the registration of other business entity types, while others do not. Included in this are joint ventures, limited partnerships, limited liability partnerships (LLPs), and limited liability limited partnerships (LLPs). Depending on your state's laws, registration may be necessary if your company is set up as one of these entities.
Why Do Businesses Require a Certificate of Good Standing?
A Certificate of Good Standing is typically issued if a small business or limited liability company (LLC) wants to apply for a foreign qualification. When a company wants to start in a new location, move from an existing site, or conduct business in another state, it must obtain a foreign qualification. If your company is based in Pennsylvania but is registered as a New Jersey entity, Pennsylvania would demand a Certificate of Good Standing as proof that your company complies with New Jersey law. Financial organizations frequently require a Certificate of Good Standing. They often need it before even considering financing a business entity in the first place. Suppose you and your company want to open a bank account, sell the business, or form a foreign entity elsewhere and receive financing from them. In that case, you will need a Certificate of Good Standing. Proof of re-compliance with a tax or state law after breaking them may also be necessary.
How to Get a Certificate of Good Standing?
The Secretary of State or equivalent office, in charge of filing entities and keeping track of business records in the state, must be contacted by businesses to obtain a Certificate of Good Standing. Many states offer an online form to request a Letter of Good Standing. Another way to receive a Letter of Good Standing is to send a written request via fax or email frequently.
How does a Company Lose its Good standing?
A Good Standing Certificate idea is pretty straightforward. But any lapse in good standing is a compliance issue that demands immediate attention. The following are typical causes for an organization losing its good standing:
Failing to submit annual reports on time
Failing to keep your registered office or agent up to date
Failing to pay franchise taxes on time
How much does it cost?
Depending on the state and the kind of business entity, a Certificate of Good Standing could cost as little as $10 or as much as $50. Additionally, the time it takes to obtain one can differ. States that issue these online do so instantly, whereas other states that don't do it online take anywhere between a few days to a few weeks to issue.