Also known as a certificate of Existence or Certificate of Authorization, a good standing certificate is a legal document issued by the state which affirms that your business has met and fulfilled all statutory requirements and can operate in the state legally.
Such a certificate is issued after the company has paid all essential state fees, turned in its annual reports, and made all-important tax payments. Many companies need a Certificate of Good standing as part of their records.
However, it is often part of the state requirements as well. The certificate is needed, especially if you need lenders for financing, want to use foreign qualifications, or need business partners in a foreign land.
A certificate of Existence is essential to all businesses and must be updated as it might be required to renew some permits. Also, in promoting your business, you need the certificate as well. It also comes in handy if you need to register your business in other states and for expansion purposes.
Generally, the good standing certificate will contain the name of the business and the clause revealing that the organization is permitted to conduct business in the state. Your company has many things to gain from obtaining a certificate of good standing.
A couple of such benefits are discussed below:
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Essential for Business Transactions and Financing
To improve your financing options, having access to various lenders is essential. Many lenders have a list of requirements, and a certificate of good standing might be part of them. Your certificate of good standing guarantees prospective lenders that you and your business can be trusted.
There are cases when your business might not get the opportunity for a proposal without having a certificate of good standing. The absence of such a certificate might make lenders doubt the authenticity of any business. As a result, such companies have a slim chance of approval. The certificate is crucial to getting approval requests and can help win contracts.
Hence it is essential to try and obtain certificate of good standing today. It will ensure you do not lose any important business transactions that might move your business forward.
Primal to the Sale of Business
At times, the need to sell a business or some assets might arise. However, one needs the proper documents to attract potential buyers, and a certificate of good standing is one of such.
With such a certificate, it eliminates all doubt about the legitimacy of the business, giving potential buyers peace of mind that your business is genuine.
The absence of the certificate can be a huge red flag that might be a turn-off to potential buyers, costing the business vast and mouthwatering deals when it is time to sell it.
It Can Support the Expansion Efforts
Every business seeks growth and expansion. However, expansion is a complicated process that involves many things. Many factors usually come together when spreading the wings to new territories.
While starting a business, you need your legal backing and a license, an essential requirement. However, when moving outside your territory, one needs to prove that the firm has what it takes to transact in new places.
It is another area where a certificate of good standing comes in, as it helps prove that your business is worth it. To make your expansion to new territories seamless, ensure you have everything the law requires.
Since a business expansion will likely open you up to a new market and bring you many customers, doing everything to make the expansion seamless is a good idea.
Primal to Your Peace of Mind
When running a business, you want to ensure you are on the right side of the law. In other words, having every legal and required document is essential to avoid any hassle with the government.
With the proper vital document, you can focus on your business’s growth and expansion, allowing your business to thrive, and maximizing profit. It is only possible if you have no legal case hanging on your neck.
Important When Attracting Investor
For expansion purposes, companies, over time, sell shares to attract investors. It helps raise money to finance the business and also expand. Investors, most of the time, are wary of putting their funds with just any company. They want proof that the company can be trusted and has what it takes to
However, to stand ahead of the crowd and attract investors, one needs to prove that the business is in a good position. What other certificate can help establish such except the certificate of good standing? It is a testament to prospective investors that the business has fulfilled all required obligations essential for continuous operation.
Besides, it reveals that the business will do all it takes to fulfil future obligations. Therefore, investors have a limited tendency to run into any doubt regarding their investment in such a business.
Conclusion
No one should see a certificate of good standing as an inconvenience from the government to make life difficult for businesses. Such a vital document is essential as it comes with various benefits for the company. A certificate of good standing keeps you on the right side of the law and helps ensure that opportunities do not pass the business.
