Certificate of Good Standing Definition

Learn more about what a certificate of good standing is in business.

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certificate of good standing definition

A Certificate of Good Standing is an important aspect of running a business compliant with all state and regulatory requirements. It verifies that a business is an actively operating legal commercial entity with the state. It also usually confirms that the business was formed legally and has been properly maintained. 

As a small business owner, you can benefit greatly from having a Certificate of Good Standing regardless of whether you run a corporation or a limited liability company. So in this brief article, we’ll review the various names for a Certificate of Good Standing and its business definition. But because there’s more to understanding a Certificate of Good Standing than just its definition, we’ll also touch on the benefits and drawbacks of a Certificate of Good Standing. 

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What is a Certificate of Good Standing?

The Cambridge Dictionary states that the definition of “Certificate of Good Standing” is “an official document that proves that a company exists, does not owe taxes, and is legally allowed to do business in a particular area.” 

Other Names for Certificate of Good Standing

With the above general definition in mind, be aware that a Certificate of Good Standing can have a slightly different meaning in different states. In fact, not all states use the phrase “Certificate of Good Standing.” Some states use the term “certificate of existence” or “certificate of authorization.” Other names include:

In Kentucky, a “certificate of existence” is just “conclusive evidence that a domestic corporation or domestic limited liability company is in existence.” It does not speak to whether the business is currently compliant or active. In Washington state, however, the same phrase, “certificate of existence,” constitutes “proof [that] an entity is current and authorized to do business in the state.” For that reason, take a minute to review how your state defines and terms a Certificate of Good Standing. 

Certificate of Good Standing – benefits and disadvantages

For most states, having a Certificate of Good Standing is not a legal requirement to run a business. However, a Certificate of Good Standing brings tremendous benefits, as well as a couple of disadvantages. 

Certificate of Good Standing – benefits

A Certificate of Good Standing’s primary advantage relates to what it says about your business. Having proof that your business is real, active, and compliant is essential for a variety of situations. Here are a few examples: 

As you can see from this list, having a Certificate of Good Standing is critical for maximizing your business’s opportunities for growth.

Certificate of Good Standing – disadvantages

The biggest disadvantage of a Certificate of Good Standing lies in obtaining one. In most states, you have to apply for a Certificate of Good Standing from the secretary of state’s office. Most states allow you to apply online, but others still require business owners to apply by mail or in person. It can take anywhere between a few business days to several weeks for the state to process your application. And you’ll also have to include a filing fee, which usually runs between $5 and $75. Finally, because a Certificate of Good Standing is available only to businesses that are legally compliant with all applicable regulations, you might have to jump through some regulatory hoops before applying for one. 

Summary

A Certificate of Good Standing shows that you own a compliant, active, legal business. By showing that your business is legitimate, a Certificate of Good Standing opens up tremendous growth and funding opportunities for your small business. 

We Can Help

Sometimes, keeping your business compliant is easier said than done. We can help make running your business hassle-free. With our Worry-Free Compliance Service, we’ll work with you to keep your business in compliance with all applicable regulations. With this service, we’ll proactively alert you about upcoming compliance deadlines. And if your business falls out of good standing for some reason, we’ll provide you with a detailed action plan to get you up and running again in no time. Finally, you can get two free filing amendments so you can adjust your business to meet your changing needs over time. Don’t wait another minute. Let us give you a hand today. 

 Disclaimer: The content on this page is for informational purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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