What is a certificate of good standing in business?
If you’re looking to set up a new business, you’ll soon find that the process involves a lot of paperwork and documents to be signed. While you may feel like dealing with the bare minimum to get your business up and running, an additional document may boost your business.
What is a certificate of good standing? Let’s explore what a certificate of good standing means and how it can help your business.
Certificate of good standing definition.
As its name implies, a certificate of good standing is a type of business document that shows that you’re up to date on all important business marks — for example, that you went through claiming a business name that’s registered with the state, authorized to perform business, and current with its fees and filings. In short, it proves to others that you’re a legit business.
A certificate of good standing is not a license, meaning you don’t have to obtain one to do business. You can legally operate your business in your registered state and do not necessarily need the certificate. However, you may need one in certain circumstances — like insuring your business or competing for a government contract.
What does a certificate of good standing look like?
As a public record of your company’s ability to do business, these formal documents tend to have professional touches.
Many will be issued and printed on special paper with a watermark or embossing to prove that they were issued by an authorized organization. They will also include the logo or letterhead of the entity issuing the certificate, which is often a government agency.
Aside from the document design, a certificate of good standing will often include the following elements to clarify who is being authorized as well as where and for what duration:
- Business name
- Business type
- Business ID number
- Authorizing body name
- Date of authorization
- Duration of authorization
- Office seal and signature
- Unique certificate number
Who issues a certificate of good standing?
State government governing bodies that regulate business operations grant certificates of good standing. Governing bodies include business filing agencies, which are typically the Secretary of State offices for individual states. You may need to do some research to find your state’s agency. For example, in Delaware, businesses must apply for a certificate of good standing through the Division of Corporations.
Who can apply for a certificate of good standing?
Generally speaking, only businesses that must register with the state, such as corporations, limited liability companies, and partnerships, may apply for a certificate. Some states may require registration for other business entities, but these can vary from state to state, so check with the state where your business resides.
If you’re operating as a sole proprietor, you’re not required in any state to register as a business, and therefore, you can’t (and don’t need to) apply for a certificate of good standing.
How to get a certificate of good standing.
Once you understand which government agency controls the issuance of letters of good standing in your state, you can start the application process. Know that not all business types are eligible for these types of certificates. Make sure your business falls into one of these categories:
- Limited liability company
- Limited partnership
- Limited liability partnership
- Corporation
- Partnership
Note that sole proprietorships cannot apply for a certificate of good standing.
To get started, make sure your business is registered with the state. This process will require you to indicate your business structure and submit supporting documents for the state to review and verify your status.
Once your business is registered, you can apply for a certificate of good standing. The process may vary depending on your operating state, but most states provide access to the application online. You can also apply via mail, phone, or email. Most applications also require a nominal fee to cover processing costs.
Application requirements will also vary by state, but they often ask business owners to submit supplemental information, such as annual financial reports, to verify their status. Additionally, make sure you meet the minimum requirements, such as being current on filing your taxes and paying any associated business fees with the state.
If you meet the criteria, you’ll receive your certificate of good standing via email for immediate use, followed by a certified hard copy you can display in your physical storefront or office.
Certificates of good standing have expiration dates in some states. If this limitation applies to you, you’ll need to resubmit your request regularly.
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