Have you been asked to provide a certificate of good standing for your business? Have you then made a request to the state agency, only to be denied a certificate of good standing?
Being denied a certificate of good standing can prevent your company from opening business financial accounts, setting up credit and debit card processing, obtaining credit, and registering to do business in another state.
The good news is that most certificate of good standing denials are for reasons that can be resolved relatively quickly.
The Certificate of Good Standing and Its Purpose
A certificate of good standing is a document issued by the state agency where certain types of business entities are required to register. This is most often the secretary of state, but some states use an agency with a different name.
A certificate of good standing verifies that a business entity is legally registered and is currently authorized to do business in the state.
In some states, it is called a certificate of status. A certificate of good standing typically has an expiration date, which is usually when the registration is due to be renewed, or when periodic documents or registration fees are due.
All states require registration of corporations and limited liability companies (LLCs). Registration requirements vary by state for other types of entities, such as partnerships, limited partnerships, limited liability partnerships (LLPs), and limited liability limited partnerships (LLLPs). No states register sole proprietorships.
A certificate of good standing can be issued to an entity that is formed in the state, or to one that was formed elsewhere and is registered in the state as a foreign entity.
The purpose of a certificate of good standing is for the company to be able to provide verification to some third party that the business is formally registered with the state and is currently authorized to do business there. A third party most likely to require a certificate of good standing is either a financial institution or an agency in another state where you are seeking to register your business as a foreign entity.
When a Certificate of Good Standing Is Denied
A request for a certificate of good standing can be denied for several reasons, including:
- Failing to pay a registration renewal fee
- Failing to file a required periodic document, such as an annual report or renewal form
- Failing to pay various types of state business taxes or fees
- Making a mistake in a filed form, such as not signing the form or not filling it in completely
- Losing a business or occupational license
- Engaging in criminal activity, including fraud, by either the business itself or an owner
Reinstating Your Good Standing
Your notice that a request for a certificate of good standing is being denied should include the reason for the denial. A great majority of denials are due to failing to pay a fee or tax, failing to file a required form, or making a mistake or omission on a form.
In such cases, all you usually need to do is pay the amount due, file the required form, or file a corrected form. If fees or taxes are past due, there may also be interest and penalties to be paid.
When your company is denied a certificate of good standing, you need to find out the reason for the denial, and what must be done to remedy the problem.
If the reason wasn't given in the denial notice, then you will contact the state agency to find out the nature of the problem and how to fix it. In most cases, this is a simple matter of either writing a check or filing a form.