What is a goodstanding certificate? 

A certificate of good standing is a document issued by the Secretary of State to certify that a company is in existence and has not been dissolved or merged.

Different states have different names for this document, including Certificate of Fact-Status, Certificate of Existence, Certificate of Status, and a few other variations. Underneath it all, they accomplish the same purpose of confirming the existence of a business entity.

Most states now issue an electronic document with a verification code that can be checked to confirm its authenticity. Some states (Massachusetts, we’re looking at you) still refuse to issue electronic certificates, and will mail out a paper certificate after payment of their fee.

In order to obtain a Certificate of Goodstanding for an entity, the entity must appear in the State’s records, and the entity must be up-to-date with its state obligations. Only then can this certificate can be obtained.

What is a Certificate of Goodstanding used for?

There are several common usages for a certificate of goodstanding. The first common usage is when a business entity is registering to do business in another state. Many states require a certificate of goodstanding to accompany the foreign registration filing so that they do not have to just rely on the word of the filer.

The other major usage is for financial transactions involving a business entity. Banks, institutional investors and other financial institutions will very often insist on confirming not only the existence of the entity but also that all annual compliance requirements have been met. When a business applies for financing, lenders have a due diligence process to confirm that the business is in compliance with its obligations, including with its state government obligations.

When bidding on a substantial contract, especially with a federal, state or local government, a certificate of goodstanding may be required to prove that the entity exists, and for the state or local government or authority, the goodstanding will be proof that the entity is registered to do business in that state.

In order to sell a business, the entity often will be required to obtain a certificate of goodstanding as part of the buyer’s due diligence process. No one wants to buy a business and find out that there are compliance issues blocking the sale or otherwise causing complications.

Also, many state and local governments require businesses to obtain certain licenses to operate legally. As part of the licensing process, a certificate of goodstanding may be required to prove the existence of the entity and of its compliance with state laws.