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What Is a Certificate of Good Standing?

Updated on January 10, 2022

What Is a Certificate of Good Standing?

What Is a Certificate of Good Standing?

If you have a registered business entity such as a limited liability company (LLC) or a corporation, you may at some point need to verify your business status, such as for a business loan. A certificate of good standing, issued by the state, verifies that you are a legally registered entity, up to date on all filings and fees, and permitted to do business in your state. You do not have to obtain one to do business. It is simply used to verify your status to third parties such as banks.

What Types of Business Entities Can Get a Certificate of Good Standing?

You must be a registered business entity. Operating as a sole proprietorship does not require registration with the state, so you would not be able to obtain a certificate of good standing. LLCs and corporations must be registered with the state, so they are able to obtain the certificate. 

In some states, partnerships, limited partnerships, and limited liability partnerships are required to be registered, so in those states, you could obtain a certificate of good standing for those entities.

Why Do I Need a Certificate of Good Standing?

You only need a certificate of good standing if another party requests one from you. This could occur if you are opening a bank account or applying for a loan. You might also need one to apply for a business credit card, or if you are setting up credit card processing for customer payments.

If you are registering as a foreign entity in another state, you will probably be asked for a certificate of good standing. 

A foreign entity is simply a business entity doing business in a state other than the one in which it’s registered. For example, if your business is registered in Alabama but you also do business in Georgia, you’ll need to register a foreign entity in Georgia.

If you have a business entity in your home state but do business in other states, you need to register as a foreign entity in all of the states where you do business. Each state has different rules defining what doing business in their state means. Check with the secretary of state in any states where you may be doing business to see if you qualify. Generally, you are doing business in another state if:

  • You have a physical presence of any kind in that state 
  • You have employees in that state
  • You regularly meet with clients, managers, or investors in that state
  • You are licensed to do business in that state

You also may be considered a foreign business if your business has a bank account or property in that state. However, if you are an online business in one state and happen to make a lot of sales in other states, you’re probably not considered a foreign business and thus not required to register a foreign entity.

How to Get a Certificate of Good Standing

To obtain a certificate of good standing, you simply need to request one from your state. You can do this through the state department or agency where your business is registered. In most states, this is the secretary of state. You can usually fill out an online request form, and some states charge a small fee. You must be up to date on all filings and fees for the certificate to be issued.

In Closing

A certificate of good standing simply verifies that you are a registered business entity that is in compliance with all state requirements. You don’t have to have one unless one is requested from you by an entity you are doing business with, or you are registering as a foreign entity in another state. The process to get one is simple. Just request one from the department or agency where you originally registered your business.