A business is not in good standing when it fails to comply with state requirements for reporting and paying fees. The status can be returned to good standing by addressing the manner in which the business is out of compliance.
Common Reasons for Not Being in Good Standing
The most common reasons businesses fall out of good standing are:
- Failing to file annual reports
- Not paying taxes and fees
- Not maintaining a registered agent
- Failing to comply with state rules
Consequences of Lack of Good Standing
What are the risks if a business is not in good standing? Risks include:
- Possible loss of access to courts
- Difficulties getting loans and financing
- Tax liens
- Loss of name rights
- Fines and penalties
Certificate of Good Standing
What It Proves
A certificate of good standing proves:
- A business is legally incorporated in a state
- It’s authorized to transact business there
- The company has complied with statutory state requirements
When It’s Needed
You typically need one when:
- Getting business loans or financing
- During mergers and acquisitions
- Opening bank accounts
- Dealing with foreign entities
- Proving ownership status
- Meeting contract requirements
Restoring Good Standing
To restore good standing status:
- File past due returns and paperwork
- Pay balances and fees owed
- Maintain a registered agent
- Fulfill annual compliance rules
Reviving a Forfeited Entity
- Even a "forfeited" entity can be revived and brought back to good standing.