Glossary of Human Resources Management and Employee Benefit Terms
A certificate of good standing is a blanket term for state certification that shows a company has completed the necessary licensing and regulatory requirements to operate. Banks providing business loans and accounts frequently ask for a certificate of good standing when serving small businesses. A certificate of good standing also allows businesses to prove their regulatory compliance in their home state as they register in other states as a foreign entity.
In certain states, a certificate of good standing is called a certificate of existence or certificate of status.
A certificate of good standing is generally valid until one of its regulatory requirements expires. If a salon needs to renew its business license each year, for example, then the expiration date for its certificate of good standing would be the date of the business license renewal. If a restaurant has health inspections every six months, the expiration date for their certificate of good standing could match that schedule.
While a certificate of good standing relies on completing legal requirements, it isn’t a legal requirement in itself. Businesses can operate without a certificate of good standing as long as they meet the other legal requirements for operation.
Each state has its own agency for issuing certificates of good standing, which is often the same agency that registers businesses. Most states register businesses through the department of the secretary of state or one of its subdivisions. Here is a list of states with specific departments for issuing certificates of good standing:
Alaska: Department of Commerce, Community, and Economic Development
Arizona: Arizona Corporation Commission
Delaware: Division of Corporations
District of Columbia: Corporations Division of the Department of Consumer and Regulatory Affairs.
Hawaii: Business Registration Division, Department of Commerce and Consumer Affairs
Maryland: Department of Assessments and Taxation
Massachusetts: Corporations Division, Secretary of the Commonwealth of Massachusetts
Michigan: Corporations Division, Department of Licensing and Regulatory Affairs
New Jersey: Division of Revenue and Enterprise Services, Department of the Treasury
Utah: Division of Corporations and Commercial Code, Utah Department of Commerce
Virginia: State Corporation Commission
Wisconsin: Department of Financial Institutions
A certificate of good standing proves that a business is registered properly with the state. Sole proprietorships and other businesses that don’t need to register with the state do not need to apply for a certificate of good standing.