Certificate of Good Standing: What Is It & How It Works

Consider the following scenario: You’re the founder of a new startup, which you incorporated in Delaware, but you live in California. You need to register your company as a foreign entity to do business there. But before you can register in California, you’ll need to obtain a Certificate of Good Standing from your incorporated state of Delaware.

Essentially, a Certificate of Good Standing validates the legitimacy of your business. Business owners might use a Certificate to register to do business in another state, apply for a business loan or insurance, seek financing from investors, or lease commercial space.

What is a Certificate of Good Standing?

A Certificate of Good Standing is a document typically issued by your business’s state of incorporation verifying that your business is 1) registered with the issuing state, and 2) in compliance with the issuing state’s laws, fees, and filing requirements.

Because these certificates are administered at the state level, the process and requirements to apply for one vary. A Certificate of Good Standing might also have a different name in certain states, such as Letter of Good Standing, Certificate of Authentication, Certificate of Existence, Certificate of Status, Letter of Legal Existence, Certificate of Authorization, and Certificate of Fact.

What does it mean to be in good standing?

A business in good standing is in compliance with all state and local laws and business regulations, is up-to-date on fees, and has met all state filing requirements. To qualify for a Certificate of Good Standing, your business must:

• Pay all applicable state and local business fees, including privilege taxes or franchise taxes
• File local, state, and federal taxes on time
• Maintain all necessary business licenses and permits
• Obey state, local, and federal law
• Comply with state and local business regulations

Once you obtain a certificate, your state may also require you to file an annual report to maintain good standing.

Who is eligible for a certificate of good standing?

Only business entities registered with the state can obtain a Certificate of Good Standing. For this reason, corporations, limited liability companies (LLCs), limited liability partnerships (LLPs), and partnerships are all eligible to obtain a Certificate of Good Standing, and sole proprietorships and general partnerships are not.

Why would you need a Certificate of Good Standing?

Although you don’t need a Certificate of Good Standing to open a business, a certificate may be necessary for a range of common business purposes. Business owners might require a Certificate of Good Standing to do the following:

• Employ workers in multiple states
• Do business in multiple states
• Seek financing from investors
• Apply for a business loan or open a business bank account
• Obtain certain business permits or licenses
• Apply for a government contract or a government loan
• Secure business insurance
• Sell all or part of your business
• Lease commercial space

How to get a Certificate of Good Standing

1. Plan your timeline
2. Research state requirements
3. Request your certificate

The details around obtaining a Certificate of Good Standing depends on how you intend to use your certificate and where your business is located, but the process is largely consistent. Here’s how to get started.

1. Plan your timeline

Plan your timeline for obtaining a Certificate, bearing in mind any recency requirements. Although most Certificates include state-determined expiration dates, your requesting agency may set stricter requirements than your issuing state. If your issuing state’s Certificates are valid for one year, as an example, but your requesting agency requires a Certificate that is no more than 60 days old, you’ll need to meet the requesting agency’s timeline.

2. Research state requirements

Make sure that your business is up to date on all state and local taxes, holds all relevant licenses and complies with all state and local laws and business regulations. Run through the following:

• Are you up to date on your taxes?
• Does your business hold all required licenses and permits? Are any of them expired?
• Are you required to file an annual report? If so, have you?
• Is your business in compliance with state, local, and federal law?

Each state maintains a different set of requirements. To find yours, consult your state’s business authority or Secretary of State. You can also retain an attorney or compliance partner for state-specific compliance guidance.

3. Request your certificate

If you plan to apply on your own, consult the list below to locate your relevant state agency, request a Certificate, and pay any required fees. Many states charge an application fee of between $10 and $50. You can also use Mosey’s compliance platform to obtain a Certificate in your state.

What to do if you are denied a Certificate of Good Standing

Your business can be denied a Certificate of Good Standing for two reasons:

• There’s an error in your filing form. You may have forgotten to sign the form or include all of the necessary documentation.
• You don’t meet one or more of the requirements. The state will deny your application if you don’t meet all of its requirements. Unpaid fees or taxes are common reasons for denial.

If your request is denied, contact the issuing agency, request information about the decision, and remedy the problem. If you are denied a Certificate because of a larger issue, like significant unpaid debt, seek help from a business attorney or financial advisor to determine next steps.

Can my business lose good standing?

Certificates of Good Standing remain valid until their expiration dates, so your business can’t technically lose good standing until it’s time to renew. To maintain good standing, keep up with all state and local business fees, licensing, permits, and business regulations, and continue to file taxes on time and comply with all applicable laws.

Once you obtain good standing, the state may also require you to file an annual report to retain your status. Consult your state’s individual requirements and set a reminder to file an annual report if required.

Mosey is a platform for employment and tax compliance. We automate setup, provide tools to identify and manage ongoing compliance, alert you when requirements change, and provide a unified source of truth. Mosey is agnostic to the payroll provider or tax vendors you use, making it a good fit for scaling startups operating in many locations at once or plan to move off of a PEO. Want to learn more? Schedule a demo—our team is excited to meet you.

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• What Is Foreign Qualification? Considerations & How to Qualify
• What Is Tax Nexus? Nexus Types & Determining Tax Nexus
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• Understanding California’s Economic Tax Nexus Test