CORPORATE TRANSACTIONS & COMPLIANCE BLOG

How to Make Sure You Can Obtain a Certificate of Good Standing

By: Teri Mayor, COGENCY GLOBAL on Thu, Jun 10, 2021

certificate_of_good_standing-resized-600Have you ever tried to obtain a Certificate of Good Standing only to find the company was not in good standing? Maintaining your company’s “good standing” status with the Secretary of State prevents fines, penalties, filing delays and the additional compliance costs required to reinstate the entity. It can also prevent costly closing delays for financing and other transactions. There are numerous other reasons for keeping business entities in good standing.

So, What is a Certificate of Good Standing?

A Certificate of Good Standing is a state-issued status document that verifies your company is properly registered and legally allowed to engage in business activities. It also serves as proof of existence of the business entity and assurance that your business follows all relevant state rules.

There are consequences of not being in good standing. Entities that are not in good standing cannot:

  • qualify to do business in another state
  • file certificates of amendment, merger or dissolution
  • in some states, obtain business or professional licenses
  • secure financing or open bank accounts

And forget even trying to sell a business that is not in good standing!

Keep in mind that loss of good standing will eventually lead to revocation. Revocation can result in the loss of the limited liability protection of business entities, thus exposing the company’s owners to personal liability for the debts incurred by the company. Revocation can also lead to a loss of an entity’s legal right to use its name and to the inability to enforce contracts in courts.

Tips for Keeping Business Entities in Good Standing

It’s never good to discover that an entity is not in good standing after a Certificate of Good Standing has been ordered from the Secretary of State. Here are a few tips for keeping your entities in good standing:

  • Keep a calendar of upcoming compliance filing events such as annual report and tax due dates for the various states in which the business is active. (Note that many states do not send notices regarding upcoming or past due reports.) Keep in mind that state agencies that collect taxes other than the Secretary of State may report noncompliance to the state, which can affect good standing status. Compile a list of requirements and fees for the various reports that need to be filed to avoid missing deadlines and prevent unnecessary document delays or rejections.

  • Business licensing may be required for an entity: Failure to obtain/renew those licenses can, in some states, affect your status with the Secretary of State. Keep a calendar of license renewals and requirements and be well prepared.

  • Perform a periodic status check in each state: This will help identify any issues before they turn into larger problems.

  • Update the principal office and mailing addresses with the Secretary of State: Submit updates as changes occur or as required (on the annual report, for example) to prevent delays in receiving of any notices and warnings.

  • Update the states’ records as soon as possible with any changes in the company’s name or structure (e.g., re-domestications or conversions): This will ensure all states properly reflect the name and entity type of the domestic state.

Valuable and affordable resources and tools are available to assist you in keeping your companies compliant with state requirements. Any number of professional registered agent service companies can provide annual status checks. Many also offer entity management systems to help manage compliance due dates along with providing forms and other assistance for all of your Secretary of State and business licensing needs.

Follow these simple tips and, with the help of some great resources and tools, avoid the unnecessary expenses and problems associated with losing good standing!

This content is provided for informational purposes only and should not be considered, or relied upon, as legal advice.

Topics: Company Formation and Filing Considerations