Certificate of Good Standing

While this document isn’t required for running a business, it is needed in many situations that lead to obtaining it. So, in terms of growth and long-term scalability, it’s an easy investment. 

For example, a certificate of good standing is required when:

• Setting up credit card processing
• Obtaining business insurance
• Renewing licenses and permits
• Registering your business in another state
• Applying for business loans or credit
• Seeking investors or partners

Government bodies that regulate business operations grant certificates of good standing. That means they’re often issued by the Secretary of State offices. The best way to find out exact information is to research your state’s agency.

Only businesses that must register with the state can apply for a certificate of good standing. For example, LLCs, partnerships, and corporations are eligible to receive it, while sole proprietorships are not. In general, states have different requirements for some types of business entities, so it’s important to check with the relevant state. 

Failing to meet state regulations can lead to hefty fines and the loss of important privileges, such as the right to use your business name, operate in the state, or access state courts. In general, even if your company doesn’t need a certificate of good standing right now, maintaining good standing with the state is crucial.

First of all, you need to ensure your business is registered with the state by selecting your business structure and submitting the necessary documents for verification. Afterwards, you can apply for a certificate of good standing. 

The application process is mostly done remotely, depending on the state (alternatives include phone or email). To get approved, you’ll need to provide documents, such as your business fees and tax fillings. Then, if everything’s alright from your end, you’ll meet the criteria and receive the certificate. 

Companies perform Know Your Business (KYB) checks to ensure potential partners, like suppliers or third-party vendors, are compliant, low-risk, and safe to engage in a business relationship. Having a certificate of good standing shows that the company is responsible and takes care of its financial obligations. That’s why it’s important to conduct KYB verification and, additionally, check if the business is in good standing as a way to prevent partnering with fraudulent entities, like shell companies created for fraudulent purposes, such as money laundering.