Letter of good standing: All you need to know (Simplified)

When running a company, certain guidelines and regulations would need to be followed, most of which would be imposed by the governing body of the specific state. Businesses that adhere to all of these imposed requirements are usually trusted more than others who haven’t, most of which attract a penalty. to signify such compliance, businesses are given a letter of standing.

What is a Letter of good Standing?

A Letter of Good Standing is a certificate issued by the Secretary of State’s office of a state (or comparable agency) to a business. It confirms that a registered business (such as an LLC or corporation) has followed all of the state’s requirements for doing business there.

How does a Company Earn a Letter of Good Standing?

letter of good standing: All you need to know (Simplified)

A corporation in “good standing” has filed all required state reports, obtained all required state licenses and permits, paid all required state taxes and fees, and complied with all other statutory requirements for running the business organization. In a nutshell, a letter of good standing is confirmation of a company’s legal compliance.

Alternate names for a Letter of Good Standing include:

  • Certificate of Good Standing
  • Certificate of Existence
  • Certificate of Authorization
  • Certificate of Status
  • Certificate of Facts

Most companies that have collected this use it to show clients a proof of their consistency in maintaining trust, professionalism, and full abidance with the state law.

 What Type of Businesses Are Eligible to obtain a good Letter of Good Standing?

  • Limited Liability Companies
  • Limited Partnerships
  • Limited Liability Partnerships
  • Limited Liability Limited Partnerships (this business structure exists in only some states)
  • Corporations (e.g., C Corporations, S Corporations, Nonprofit Corporations, Professional Corporations)

Because sole proprietorships and general partnerships are not statutory entities, states do not issue Certificates of Good Standing to them. Sole proprietors and general practitioners may alternatively offer to provide bank statements or tax returns as proof of their trustworthiness and feeling of responsibility if asked to do so.

How does a business obtain and maintain a letter of standing?

Common requirements for staying in good standing with the state include:

  • Paying taxes on time (federal, state, and local income tax; sales tax; franchise tax)
  • Filing an annual report and submitting other mandatory documentation
  • Obeying local zoning and permitting requirements
  • Keeping business and professional licenses current
  • Maintaining a registered agent
  • Following all corporate rules (e.g., holding required meetings and preparing minutes; maintaining a board of directors; following bylaws, etc.)

While obtaining a good letter of standing is not a requirement of any businesses, businesses owners could consider it a representation of a ‘good’ company following the necessary rulebook.

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