As a business owner, you know how important it is to gain trust—to instill confidence in your customers, employees, and vendors that you’re an ethical, dependable, and honorable business.
But unfortunately, trust is hard to come by. Edelman’s 2019 Trust Barometer Special Report found that only one-third of consumers trust most of the brands they buy.
There’s no quick trick or hack to prove that you’re authentic, upright, and deserving of faith from others. However, a letter of good standing is a step in the right direction toward demonstrating that your business plays by all of the rules.
What Is a Letter of Good Standing?
A letter of good standing is a legal document that confirms that your business has complied with your state’s rules and regulations, such as registering a business entity, paying your business taxes, and generally checking all of your state’s boxes.
Different states have different terms, so you might also hear this referred to as a certificate of good standing, a certificate of existence, or a certificate of status.
Where Can I Get a Letter Good Standing From My State?
This document is issued by the state agency your business is registered with.
In most places, this is the state’s Secretary of State office. However, states have different names for this agency as well, such as the Department of Financial Institutions, Division of Corporations, Business Registration Division, and more.
Not sure where you should look? Simply search “letter of good standing + [your state name]” to find out where you can request this certificate. Or check out this list:
Is a Certificate of Good Standing Required For Businesses?
Generally, this isn’t a requirement for businesses—but be aware that you might be asked for one anyway (more on that a little later).
However, it’s important to note that actually registering your business is likely still required. Obtaining a certificate of good standing is a separate process, often with a separate application process and fee.
Whether or not you need to formally register your business entity will depend on your location and your business type. For example, sole proprietorships don’t need to register their businesses with the appropriate state agencies.
However, if you have a different business structure like a limited liability corporation (LLC), partnership, limited liability partnership (LLP), nonprofit, or corporation, then you’ll most likely want to register to get all of the legal and tax benefits of having an established business. Again, your state will determine whether or not registration is a requirement.
What Is this Certificate or Letter Used For?
Keep in mind that this simply documents that your business abides by the various rules of your state. While having one isn’t a requirement, you could be asked for one in a variety of scenarios, including:
- Proving Your Legitimacy: Remember when we touched on the importance of trust? Occasionally different parties—whether it’s potential customers, vendors, or business acquaintances—will request a certificate of good standing for verification of your business’ legitimacy.
- Addressing Your Finances: When opening a business bank account, seeking an investment, applying for credit or a business loan, or setting up debit or credit card payment processing for your customers, it’s likely that a financial institution will want to see your certificate.
- Securing Business Insurance: If you want to get an insurance policy that covers your business, be aware that some insurance providers might ask for this proof of good standing.
- Getting a Business License: If you need a business license (like an occupational license or even a liquor license), your state could require a certificate of good standing before issuing that license.
- Registering as a Foreign Entity: When your business is located in one state but you register it to do business in another state, that’s called a foreign entity. So, for example, if you formed your business in Rhode Island but also want to do business in Nevada, you register your business through a process called foreign qualification. You’ll likely need to provide a certificate of good standing from your home state to complete that process.
How Do You Get a Letter of Good Standing?
The process of obtaining this document is another thing that will differ between states. However, it typically involves filling out an application or submitting a written request to your state agency, along with paying a fee to get the actual certificate.
Let’s look at New York as just one example. On their Division of Corporations website, they explain that a written request should include:
- A specific statement requesting the certificate of status
- Exact name of the business entity
- The business’s Department of State ID number of exact date of formation or authorization
- Explanation of whether the request is for routine processing or expedited processing
- Mailing address where the certificate should be mailed
Those are the requirements for New York, and they could be slightly different in your state. But typically, obtaining a letter of good standing involves submitting some basic information about your business and paying a small fee.
Does This Letter Ever Expire?
Yes, your certificate will expire. Expiration dates can vary by state, but a good rule of thumb is that most letters of good standing are only valid somewhere in the range of 30 to 90 days.
Keep in mind that some professionals or organizations—like a bank or a lender, as one example—might have different regulations for what letters of good standing they’ll accept. They might want one that has been issued in the past 30 or 60 days, instead of 90.
How Much Does This Letter Cost?
The cost of a certificate of good standing will vary based on the state where you’re applying and your business entity type. Fees typically range from free to $100.
Check with your state office to get the specifics on how much you’ll need to pay to apply for and receive your letter.
What if Your Business Loses Its Good Standing?
As you might suspect, it’s possible for your business to lose its good standing if it fails to file required reports or forms or pay necessary fees or state taxes. When that happens, your business will be marked as “void,” “suspended,” “dissolved,” or “delinquent” in your state’s official records.
So, can you get your good standing back? Yes.
This process is called reinstatement, and it will require that you submit the necessary forms and fees and abide by all regulations in order to bring your business back to compliance.
Examples of Certificates of Good Standing
Are you tired of us saying that things depend on what state you’re located in? Well, it’s true. Exactly what information appears on certificates of good standing will vary from state to state.
At their most basic, they’ll include:
- Your business name
- Your business filing date
- Your business city and state
- Statement of your good standing with the state
- Official seal of your state agency
- Name, title, and signature of your secretary of state or other official
...and that’s really it. It’s a fairly straightforward, single-sided document. If you want to see samples of the official documents, you can view examples from each state right here.
Trust Is Hard To Gain, But This Document Can Help
Here’s the bottom line: Trust is undeniably important in order for a business to succeed, but there’s no easy way to get it. It takes time, effort, and consistent demonstration that your business is worthy of that loyalty and faithfulness.
The good news is that a certificate of good standing can bump up your trustworthiness by formally documenting that you’re meeting all of the business requirements of your state. And even better? Getting this certificate is relatively easy.
Use this as your guide, and you’re on your way to having some tangible proof that your business does everything aboveboard.