When you’re a business owner or entrepreneur, there are several documents and certifications that you need to obtain to stay compliant with the law and prove that your business is operating legally. One such certification is the Certificate of Good Standing.

In this article, we’ll explore what a Certificate of Good Standing is, why it’s essential for your business, how to obtain one, and other relevant information about it.

What is a Certificate of Good Standing?

A Certificate of Good Standing (COGS) is a legal document that verifies that a business entity, such as a corporation or limited liability company (LLC), is authorized to operate in a particular state or jurisdiction. It’s also called a Certificate of Existence or a Certificate of Authorization.

The Certificate of Good Standing confirms that the business entity is in compliance with state laws, has paid all necessary fees and taxes, and has filed all required annual reports and other documentation. It also confirms that the business is up-to-date with its state registration and is authorized to transact business in the state.

Why is a Certificate of Good Standing important for your business?

There are several reasons why a Certificate of Good Standing is essential for your business. Let’s take a closer look at why a Certificate of Good Standing is important for your business.

Enhances your business’s reputation and credibility

Obtaining a Certificate of Good Standing can enhance your business’s reputation and credibility. It shows that your business is in compliance with state laws, has paid all required fees, and is authorized to operate in a particular state. This document can give customers, suppliers, and partners peace of mind that they’re doing business with a legitimate and trustworthy company.

Business Bank Account

Another important reason why a Certificate of Good Standing is essential for your business is that it’s required by banks for opening a business bank account. Banks need to verify that your business is legitimate and in good standing before opening a bank account. A Certificate of Good Standing serves as proof that your business is authorized to operate in a particular state and is in compliance with state laws.

Without a Certificate of Good Standing, you may have difficulty opening a business bank account, which can make it challenging to manage your business’s finances. This document can also help you access various financial services, such as merchant services or credit card processing, which can be essential for running your business.

Required for certain business transactions

A Certificate of Good Standing may be required for certain business transactions, such as obtaining business loans, renewing business licenses, and bidding on government contracts. For example, if you’re applying for a business loan, the lender may require a Certificate of Good Standing to verify that your business is in good standing with the state and has no outstanding legal or tax issues.

Protects your business’s legal standing

A Certificate of Good Standing is essential for protecting your business’s legal standing. If your business is not in good standing with the state, you may be subject to fines, penalties, or legal action. For example, if your business fails to file annual reports or pay required fees, your business may be dissolved or suspended, and you may lose your limited liability protection.

Required for foreign qualification

If your business operates in multiple states, you may need to obtain a Certificate of Good Standing from each state where you’re authorized to do business. This process is known as foreign qualification. Without a Certificate of Good Standing, you may not be able to legally operate in other states.

Required for third-party verification

Some organizations, such as banks or lenders, may require third-party verification of your business’s good standing. You can usually obtain this verification by providing your Certificate of Good Standing to the organization or by using a service that provides third-party verification. This document can help streamline the process of obtaining financing or other services for your business.

How to obtain a Certificate of Good Standing?

The process of obtaining a Certificate of Good Standing varies by state, but generally, you’ll need to follow these steps:

Step 1: Check eligibility requirements

Before you apply for a Certificate of Good Standing, you’ll need to make sure that your business is eligible. In most states, you must be current with all state filings, fees, and taxes. You’ll also need to have a registered agent and a valid business address in the state.

Step 2: Submit the application

To obtain a Certificate of Good Standing, you’ll need to submit an application to the appropriate state agency. The application typically requires your business’s name, address, registered agent information, and other basic information. You may also need to provide a list of owners or officers.

Step 3: Pay the fee

There is usually a fee for obtaining a Certificate of Good Standing. The fee varies by state but is typically between $10 and $100. You can usually pay the fee online or by mail.

Step 4: Wait for processing

The processing time for a Certificate of Good Standing varies by state, but it typically takes a few business days to a few weeks. Some states offer expedited processing for an additional fee.

Step 5: Receive the certificate

Once your application is processed, you’ll receive a Certificate of Good Standing. The certificate is usually mailed to your business address or can be downloaded from the state’s website.

Other things to know about a Certificate of Good Standing

Here are some additional things to keep in mind about a COGS:

1. Renewal: A COGS is usually valid for a specific period, typically one year. You’ll need to renew it annually to maintain your business’s good standing.
2. Name change: If your business changes its name, you’ll need to obtain a new COGS with the updated name.
3. Foreign qualification: If your business operates in multiple states, you may need to obtain a COGS from each state where you’re authorized to do business. This process is known as foreign qualification.
4. Different names: The Certificate of Good Standing may have different names in different states. For example, in California, it’s called a Certificate of Status, while in Delaware, it’s called a Certificate of Existence.
5. Non-compliance: If your business is not in good standing, you’ll be unable to obtain a COGS. In this case, you’ll need to rectify any outstanding issues, such as paying overdue fees or filing missed reports, before you can obtain a Certificate of Good Standing.
6. Third-party verification: Some organizations, such as banks or lenders, may require third-party verification of your business’s good standing. You can usually obtain this verification by providing your COGS to the organization or by using a service that provides third-party verification.
7. Online services: Many states offer online services for obtaining a COGS, such as online applications and online payment options. Check with your state’s business registration agency to see if this option is available.

Conclusion

In summary, a Certificate of Good Standing is a legal document that verifies that your business is authorized to operate in a particular state and is compliant with state laws. It’s essential for maintaining your business’s good standing, enhancing your business’s reputation and credibility, and conducting certain business transactions.

The process of obtaining a Certificate of Good Standing varies by state, but generally, you’ll need to submit an application, pay a fee, and wait for processing. You may also need to renew your COGS annually and obtain a COGS from each state where your business operates.

If you’re a business owner or entrepreneur, obtaining a COGS should be a priority to ensure that your business is in compliance with state laws and authorized to operate.