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By Mike McLeod Updated on November 8, 2022

What Is a Certificate of Good Standing and Why It Matters

There are many federal, state and local documents you need when starting or operating your small business.

Many lenders, investors and clients need to know you’ve paid the fees and have the licenses and permits you need to conduct business legally in your state, and a “certificate of good standing” is a document that affirms you have all of those relevant components. When you apply and qualify for a certificate of good standing, you’re effectively saying your business is in “good standing” within the state you operate. 

Let’s go through what a certificate of good standing is, who needs one and why and how you can get one today.

Certificate of Good Standing Image

What Is a Certificate of Good Standing?

A certificate of good standing — also called a “certification of facts,” “certification of status” or “certification of existence” — signifies that your business has met all necessary regulatory and compliance standards and is therefore legally authorized to conduct business within that state. It’s a document generally issued by the secretary of state’s office in which your business is incorporated. 

Unlike articles of incorporation and other documents you submit when starting your business, you don’t need a certificate of good standing before you begin operations. It merely confirms that the state recognizes your business has submitted those other documents. Without it, those who need to check your business’s legal status would have to verify each piece of information independently.

Requirements vary by location, but often you’ll need to be up-to-date with the following:

  • Taxes
  • State and local fees
  • Regulatory and compliance documentation
  • Licenses and permits

The certificate usually has an expiration date that will coincide with the due dates of your documents, fees and business licenses.

  • Certificate of Good Standing Sample

    Certificates are issued state by state, and while there isn’t a strict uniform format for the document, most certificates of good standing include these elements:

    • A title noting the document is a certificate of good standing or certificate of status or certificate of existence
    • The issuing state’s seal
    • The issuing and expiration dates
    • What the certificate signifies

    Example: Arizona Certificate of Good Standing

Do I Need a Certificate of Good Standing?

Not all businesses need to obtain a certificate of good standing. It can depend on your business structure, home state and whether you conduct business across state lines.

The type of entity your business is organized as affects whether you need to apply.

  • If you run a sole proprietorship, you will not need to obtain a certification. These businesses are not registered or filed with the government, so there’s no need to check whether they’re in “good standing.”
  • General partnerships are looked at as sole proprietorships with 2 or more owners, so most states recognize and regulate them similarly. Both Limited Partnerships and Limited Liability Partnerships (LLP) can also vary by state. Contact your secretary of state’s office to make sure you don’t need to apply. In these cases, interested parties will need to do their due diligence to verify any information you provide them.
  • Limited Liability Companies (LLC) and corporations are required to obtain a certificate of good standing. These businesses are highly regulated and must file multiple documents with the state, so it’s important for others to know that they’re in good standing. Failure to do so could hurt your chances of receiving funding in the future and affect your business’s ability to grow.

Three people sit down for a business meeting in an office.

When You Need a Certificate of Good Standing

While some can legally operate their businesses without a certificate of good standing, potential stakeholders will want to know their business is working in compliance with the law.  There will be situations where a certificate of good standing can help your small business take advantage of financing or growth opportunities, such as: 

Applying for a Small Business Loan

At some point, your small business will need funding to finance equipment, purchase inventory or raise the working capital necessary to run operations. Obtaining a loan can involve putting together a lot of financial paperwork, and most require a certificate of good standing to verify that your business is legally operating. Failure to have one could complicate the application process and hurt your chances of being approved.

  • Learn how Fast Capital 360 can take the hassle out of applying for a small business loan and get you approved today!

Handling Day-to-Day Operations 

A business certificate of good standing can be a key document when you need to secure components that will help you operate your business. This includes:

  • Opening a business account: Most banks will want to see your business certificate of good standing to confirm you’re complying with your state’s requirements and regulations.
  • Obtaining licenses and permits: If your industry requires you to have any special licenses or permits to operate (e.g., a salon, medical office or restaurant), the certificate of good standing will be used to receive and renew them.
  • Earn potential clients’ and investors’ trust: Some clients will also need to see the certificate before working with you, especially if certain licenses and permits your industry requires to conduct business. Investors — if you are starting up or looking to grow — want to see if you’re in good standing before judging whether investing in your company is worth their financial risk.

Conducting Out-of-State Business

If you own a small business that already works with clients across state lines or want to expand your territory to increase sales, you’ll need to file as a foreign entity with the new state. This process requires current proof of your status via a certificate of good standing.

Note that if you’re in a state that doesn’t require a certificate of good standing for foreign entities — Alaska, Kentucky, Minnesota, Pennsylvania and Texas — you’ll still need to obtain it to become a foreign entity in a state that does.

A man’s reflection is visible in the glass office door he’s about to open. A certificate of good standing is helpful if you want to acquire or sell a business.

Business Acquisition or Sale

If you plan on acquiring a business, you’ll need to show that your current enterprise is legally running. When selling your business, potential buyers will need to do their due diligence before making an offer. It’s important to have a certificate of good standing before beginning this process because, without it, negotiations can halt and potentially stop a deal from materializing.

Reasons Your Application for a Certificate of Good Standing Could Be Denied 

The state could decline to renew your certificate of good standing for serious reasons, such as criminal charges against your business or you, as the business owner, or if your business lost one of its licenses. However, it could also be denied for failing to pay any renewal fees or for any incorrect information on any of your documents for your business certificate of good standing.

Applying for a Certificate of Good Standing

Your state’s or commonwealth’s secretary of state office usually handles a business certificate of good standing application. The application process and fees vary by state — Wyoming and Colorado are free — so make sure to check online to confirm the fees for this document. 

Here are links to more information on applying in your state:

(Note: Washington, D.C. and Puerto Rico have their own separate offices.)

Also remember that states refer to this document differently, as a “certificate of good standing,” but also a “certificate of status” or “certificate of existence.” 

Many states offer online applications, but you could also receive yours by mail, email or in person. Completing the process online or through standard mail is your best bet to ensure speed and accuracy.

Mike McLeod is a former senior SEO specialist at Fast Capital 360. He has a passion for giving small business owners, like you, the financial and strategic tools they need to realize the American dream.
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