A Certificate of Good Standing, often referred to as a Letter of Good Standing, is a crucial document for businesses, particularly when expanding operations into new states. Many states require this certificate, with a specific list of them mandating that the document be less than 90 days old to ensure current compliance.
What is a Certificate of Good Standing?
A Certificate of Good Standing is an official document issued by a state's Secretary of State or equivalent agency. It verifies that a business entity, such as a corporation or LLC, is properly registered and compliant with all state requirements, including annual report filings and franchise tax obligations. This document essentially confirms that the business is legally authorized to operate in that state and is "in good standing" with the regulatory body.
Why is it Needed?
Businesses commonly need a Certificate of Good Standing when they want to "foreign qualify" to operate in another state. Foreign qualification is the process by which a business officially registers to conduct business in a state other than the one where it was originally formed. This step ensures legal compliance, allowing the business to:
- Open a business bank account
- Sign commercial leases
- Obtain necessary state or local licenses and permits
- Transact business legally within the new state
States Requiring a Recent Certificate of Good Standing
Several states specifically require a Certificate of Good Standing to be less than 90 days old for foreign qualification purposes. This ensures the information provided is current and accurately reflects the business's ongoing compliance status.
Here are the states that require a Certificate of Good Standing to be less than 90 days old:
| State | Requirement Detail |
|---|---|
| Connecticut | Certificate must be less than 90 days old |
| Florida | Certificate must be less than 90 days old |
| Georgia | Certificate must be less than 90 days old |
| Idaho | Certificate must be less than 90 days old |
| Iowa | Certificate must be less than 90 days old |
| Kansas | Certificate must be less than 90 days old |
| Louisiana | Certificate must be less than 90 days old |
| Maine | Certificate must be less than 90 days old |
| Maryland | Certificate must be less than 90 days old |
| Massachusetts | Certificate must be less than 90 days old |
| Nevada | Certificate must be less than 90 days old |
| North Dakota | Certificate must be less than 90 days old |
| Ohio | Certificate must be less than 90 days old |
| South Dakota | Certificate must be less than 90 days old |
| Washington | Certificate must be less than 90 days old |
The requirement for the certificate to be less than 90 days old is critical. Businesses should plan to obtain this document close to the time they intend to file for foreign qualification in these specific states to ensure its validity during the application process.
When Else Is a Certificate of Good Standing Needed?
Beyond foreign qualification, a Certificate of Good Standing can also be required for various other business activities, signaling a company's legal health and compliance. These include:
- Obtaining Business Loans: Lenders often request this document to verify the legal standing and legitimacy of the borrowing entity.
- Opening Business Bank Accounts: Financial institutions may ask for it to ensure the business is properly registered.
- Selling or Merging a Business: During due diligence, potential buyers or merger partners will want to see proof of good standing.
- Applying for Business Licenses or Permits: Many state and local agencies require it as part of the application process for various professional or operational licenses.
- Renewing Certain Business Registrations: In some cases, it's part of an annual renewal process.
