The certificate of good standing which can also be called names like letter of good standing, certificate of facts, certificate of existence and certificate of status, states that the business which has acquired it has no outstanding debts and has complied with the regulations for business practices in the state where it is located. It also gives the business the go ahead to perform transactions within the state.
Conditions for Getting a Certificate of Good Standing
Companies have to:
- Be legally registered in their respective states of business
- Follow rules and not have their businesses dissolved by the state.
- Be up to date on all payments, including taxes.
The Purpose for a Certificate of Good Standing
The certificate of good standing is used to prove to financial institutions that it is legal for them to carry out transactions in the state. A certificate of good standing can be used for various things, some of which are selling the company, as proof of the company’s compliance with its founding state, business transactions, getting loans from banks or creating a new account with financial institutions. This certificate should only be obtained when the company is in the states good graces. Failure to comply with the rules of the state would mean that the certificate would have a bad standing.
Who Is In Charge Of Providing The Certificate Of Good Standing?
Agencies ( in the state the business operates) responsible for filing and making sure that records from different companies are up to date are in charge of giving out the certificate of good standing; this can be the secretary of state.
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