No matter how old we get or how many businesses we own, we are never free of the dreaded “Report Cards” of life. As adult individuals we must concern ourselves with the data listed on our personal credit reports. As business owners and leaders, we must be aware of “Certificate of Good Standing”. For many business owners, we are only aware of this Certificate when someone asks for it. In most cases, this would be a banker who is trying to close a loan for us or perhaps a vendor who is setting up a credit line for our business. Whatever the situation, when a business owner is asked for one, it is generally in a circumstance of importance to the business’ welfare. So, what exactly is the report card of sorts and why is it so important?
The Certificate of Good Standing is a report issued by the State in which your business was incorporated. What the report testifies to is that depending on the entity type, the proper reports have been filed as well as the verification that fees and taxes have been paid. Absent a Certificate of Good Standing, a business loses its ability to transact business or be a party to a lawsuit. Long story short, not being in good standing with the state can put you out of business.
If you’re not in “Good Standing” today, it means something is wrong with your state filing. If you don’t fix the problem, the state could potentially dissolve your company in certain circumstances. When this happens, all sorts of problems from liability, to taxes and more, can develop.
For as important as the Certificate of Good standing is, the physical presence of it can be a bit underwhelming – essentially, it’s a piece of paper the state produces that list your business and notes that you’re in good standing. As you can fall in or out of good standing as time goes on, you will more than likely be required to produce a new one anytime you are conducting certain types of business transactions.
Unlike your childhood report cards that were conveniently mailed home to your parents, obtaining a copy of your Certificate of Good Standing requires a business owner to be a bit more pro-active. You can always contact the State where the business was incorporate yourself and navigate their process or let Law 4 Small Business be of assistance by simply ordering the Certificate of Good Standing conveniently using our website.
Law 4 Small Business, P.C. (L4SB).
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