A Certificate of Good Standing is key to your business’s success
Whether you’re looking to borrow money to put toward expanding your business, or recruiting investors for your growing business, obtaining a Certificate of Good Standing is a critical step in the process. Not only does this certificate indicate that you’re business is legally authorized to operate in your home state, it can help you sell your product or services out of state. So, how do go about securing one? It’s easier than you may think. Read on for more.
What is a Certificate of Good Standing?
A Certificate of Good Standing is a state-issued document that confirms that you’re either an LLC or a corporation, you’ve paid all fees and taxes required by your state and filed the appropriate annual reports. It’s also commonly referred to as a Certificate of Tax Compliance.
Why is it Important?
If you need to secure a loan for your business, or even if you’re looking to open a business checking account, most banks require a Certificate of Good Standing that proves you’re in compliance with your state’s regulations. Think of it this way: A bank isn’t going to want to do business with a company that neglects to pay state taxes and fees.
If business is booming and you’re looking to form a foreign entity outside of your home state, most states will want to see that you’re in good standing before allowing you to conduct business.
A Certificate of Good Standing can also save you money. If you’re not meeting your home state’s requirements for doing business, the state may be able to impose fees and penalties. Staying in good standing with your state means that you’ve paid all necessary taxes and fees and filed annual reports on time.
A Certificate of Good Standing may also be required if you’re signing business contracts or completing transactions and if you want to sell your business down the road.
How to Apply for a Certificate of Good Standing
A Certificate of Good Standing is issued by your home state’s secretary of state office. Although the specific requirements may vary by state, you’ll generally need to provide the following:
- Company name
- Date of formation
- State of formation
- Business address
- Registered agent name and address
- Federal tax identification number
- Unemployment insurance number
You’ll also pay a small fee that varies depending on your state.
How to Keep Your Business In Good Standing
Once you’re approved, don’t slack, because having a business in “bad standing” disables you from signing contracts or permits, making bank transactions, expanding and more. Plus, it could scare potential employees and customers away. To stay in good standing, keep your company records in order—and separate from your personal ones. Make sure any information you’ve given to the state is up to date (if you move offices, for example, you need to update your address with the state), and file your annual reports on time.
If you’re worried about your business and want to ensure you don’t slip into bad standing, work with an experienced business attorney who can help you keep track of documents, file any necessary paperwork, and make sure you stay on the good side of the state. Contact us today.