A certificate of good standing (also called a certificate of existence, status certificate, or certificate of authorization) is a document issued by a government authority, generally a secretary of state. It shows your entity has met its statutory requirements and is licensed to do business.

Banks often need a Certificate of Good Standing from a business when opening bank accounts. Therefore, when obtaining financing, most people order one at the time they incorporate so they can directly open their business bank accounts upon receipt of their filed formation documents.

If you are foreign and running a business in another state, a Certificate of Good Standing is required in most cases. This is to prove to the jurisdiction that you are registered in your business entity's home state and abide by that jurisdiction's rules.

A Certificate of Good Standing will typically have the entity's name and a small paragraph stating that the entity is qualified to do business in that jurisdiction. Depending on the jurisdiction it is acquired from, it might also be on particular decorative paper or have a decorative embossed seal.

So, acquiring a Certificate of Good Standing is a must if:

• You are opening a new bank account.
• You are attempting to receive credit on behalf of the business entity.
• You must prove in court that your entity is in good standing with the state.
• You are a foreigner qualifying your entity to do business in a different state.

There are various reasons that a certificate of good standing is essential for different companies and corporations. This document is designed to inform others that you carry out your business legally and adequately and are trustworthy. This can be important for:

• Companies you want to do business with. It assures them that you have fulfilled your past obligations and are more likely to fulfill them in the future.
• Banks and financial institutions you are looking to receive credit or loans from. This assures them you can be trusted to pay back the money they give you.
• Individuals or other companies that you are looking to sell your business to assure them there is no hidden debt or liability before they make the purchase.
• In other states where you would like to do business as it assures them you run a legitimate company that benefits the people of their state.
• Investors you would like to receive funds from. A certificate assures them that you are not hiding large amounts of debt and can be trusted to use the funds efficiently.

You can also use this document to show that your business is operating as it should be and that you have nothing to hide. While it is not often requested by customers and is not required for this purpose, it can still earn increased trust from new customers.

Since not all types of business entities are required to register with the state, not all entities can get a certificate of good standing.

If you are operating your business as a sole proprietorship, you will not be required to register in any state and will not need to be concerned about a certificate of good standing. On the other hand, all states require the registration of corporations and limited liability companies (LLCs).

Various other business entities must be registered in some states but not others. This includes limited partnerships, limited liability partnerships (LLPs), and limited liability limited partnerships (LLLPs). If your business is organized as one of these entities, your state's laws will determine whether registration is required.