What Is a Certificate of Good Standing & How Do You Get One?

Most entrepreneurs start their business with dreams of growth: securing major contracts, expanding nationwide, and maybe even selling one day. While all of those possibilities, the path toward those goals is lined with paperwork.

One piece of paperwork you might need in your pursuit of any of the above is the certificate of good standing. Here’s what you need to know about this state-issued document.

What is a certificate of good standing?

A certificate of good standing is a formal document that certifies that a business entity is legally registered and authorized to conduct business within a particular state. These certificates are typically issued by the office of the Secretary of State, although some states issue them via other offices. Maryland, for example, issues them from the Department of Assessments and Taxation.

They may be required for many business structures, including limited liability companies (LLCs), limited liability partnerships (LLPs), limited partnerships (LPs), corporations (C corps and S corps). However, they are not required for general partnerships and sole proprietorships.

When does a business need a certificate of good standing?

Here are some scenarios where a certificate of good standing comes into play:

• Applying for business loans. A certificate of good standing might be a requirement for obtaining a business loan, depending on your lender. It serves as proof that your business is compliant with state regulations, which the lender may verify before approving financing.
• Expanding operations out of state. When a business wants to register and operate in a new state, that state typically requires a certificate of good standing from the business’s home state. This verifies the business is on legally sound footing in the jurisdiction where it was originally formed.
• Renewing business licenses. Some professional licensing boards, permitting boards, and local governments require a certificate of good standing as part of a business license renewal process. This helps them confirm the business continues to meet all state-level legal requirements.
• Selling your business. During the due diligence phase of a business sale, the buyer’s attorney or a potential investor may request a certificate of good standing. This provides proof that the company is legally sound and free from any outstanding filings, fees, or tax issues that could impact the sale or incoming owner.
• Signing contracts. When entering into a significant contract with another business or government agency, the other party may request a certificate of good standing. With lots of money at stake, your business partner understandably wants to verify that your company is not at risk of legal action from the state.

How to get a certificate of good standing

1. Research state regulations in your area
2. Submit an application to your state government
3. Account for fees and accepted payment methods
4. Renew your certificate of good standing when needed

Here’s what to know about getting a certificate of this type.

1. Research state regulations in your area

The first step is to research the specific requirements in your state, as the rules and regulations for a certificate of good standing vary significantly. Each state has its own enterprise services division or filing registry that manages certificates of good standing. These are typically housed within a Secretary of State’s office.

Some states have different names for the certificate, such as a certificate of existence or certificate of status, and different requirements for obtaining one. Here are two examples of how two states vary in their definition and scope of this document:

• New York. In New York, a certificate of good standing is known as a certificate of status. To obtain these documents in New York, your business must be current with all its biennial statements and franchise tax filings. New York law requires that business entities apply for these documents directly from the Department of State.
• California. California also uses the term “certificate of status.” To obtain one, you must file a Statement of Information with the Secretary of State’s office. You must also be up to date on all taxes and fees owed to the Franchise Tax Board (FTB). California’s certificate of status confirms that a business is active, its publicly listed information is up to date, and it has no current penalties or suspensions. Certified copies of the documents can be ordered online.

2. Submit an application to your state government

Once you’ve confirmed the requirements for your entity type (e.g., LLC, corporation, etc.), you can submit your request. Certificates can typically be obtained online, but in some cases, a person might have to file a written request through the mail. Prepare to include specific details, such as your business name, trade name (or doing business as name, orDBA), and mailing address.

3. Account for fees and accepted payment methods

Regardless of where you live, you’ll need to pay a processing and filing fee for a certificate of good standing, which is typically $50 or less. Fee payment options will vary from state to state; most let you pay the required fee via ACH bank withdrawal, credit cards, debit cards, and a money order. If you need a faster turnaround for a loan or partnership deal, states may offer expedited processing for an additional fee.

4. Renew your certificate of good standing when necessary

Certificates often have an expiration date, at which point you can apply for renewal. If your certificate expires and you quickly need a new one, you may be able to pay a rush fee to expedite a renewal.