If you intend to start a business in the state of California, you will be required to obtain a Certificate of Good Standing. This important business registration document is also known as a Certificate of Existence in California and is issued by the Secretary of State’s office.
It certifies that your business is officially in compliance with all the various California state laws that apply to your business. This certificate is an integral part of the overall documentation that your Limited Partnership, LLC or corporation needs to legally do business in California. It is used for various legal matters and when dealing with the state and/or other business entities.
Why You Need a Certificate of Good Standing: California
There could be significant financial consequences if you don’t obtain a Certificate of Good Standing for your California business. If you ever need to secure a bank loan or a line of credit for your business, you will likely be asked to provide a copy of your Certificate of Good Standing.
This will show the bank or the credit agency that you are a legitimate business entity, fully licensed and legally registered to do business in the state of California. Without this document, it could be more difficult to secure additional funding for your business. If you can’t raise sufficient amounts of capital, scaling your business might be impossible.
Quite literally, it pays to have a Certificate of Good Standing. Potential partners and investors will be able to verify that your business is a legitimate and trustworthy one.
Moving Your Business from California to Another State
What if your business is based in California, but you plan on expanding to another state? That’s great! Your business is booming and obtaining a Certificate of Good Standing will also help you facilitate this expansion.
Make sure to check with the appropriate authorities when you are moving your business to another state. Some states have different laws when it comes to certifying your business. The Certificate of Good Standing that is issued by California is typically valid for up to one year after it is issued, but some agencies will require a certificate that has been issued within the past 30 days.
It might be necessary to get a more recently issued certification, depending on the laws of the state you’re moving your business to. Depending on the type of business you’re in, it might make sense to keep an up-to-date Certificate of Good Standing on file so that you are prepared to present it for any business or legal matters that may arise.
The state of California issues a Certificate of Good Standing from the Secretary of State’s office located in Sacramento, California. Applications are accepted in person or by mail only. There is currently no electronic method of obtaining this certification.
If you're applying in person, the processing time can take several business days. If you’re applying through the mail, it can take over a week. Depending on the time of year, these processing times can fluctuate, and during particularly busy times, it can take even longer.
Stay in Good Standing
So you’ve got your shiny new Certificate of Good Standing from the State of California...how does your business maintain its good standing with the state?
The answer is pretty straightforward, but it never hurts to be reminded of it: Stay up to date on your business filings and necessary documentation. Make sure that you’ve paid all necessary licensing fees and taxes.
California requires certain types of businesses to file an Annual Statement of Information or a Biennial Statement of Information. If you’ve neglected to do this, you may lose your status of good standing with the state and have to pay a late-filing fee and a certificate reinstatement fee.
Aside from filing your official paperwork in a punctual fashion, the Franchise Tax Board levies an annual tax on businesses in the state of California that must be paid to remain in good standing.
When you’re doing business in the state of California, there are a lot of licenses, rules and regulations to contend with and keep track of. A Certificate of Good Standing is the official proof from the state of California that you have paid all the necessary fees and taxes and all of your licensing and paperwork is up-to-date and in order.
Since you’ve done all the legwork to get your business in compliance, make sure you finish it off with obtaining your Certificate of Good Standing.
Are you ready to start a business, form an LLC or reorganize your business structure with a Series LLC to fit multiple businesses or meet the changing needs of your company? Talk to Incfile today! Our incorporation experts can help you evaluate your options with state-specific advice.
Ben Gran is a freelance writer from Des Moines, Iowa. Ben has written for Fortune 500 companies, the Governor of Iowa (who now serves as U.S. Secretary of Agriculture), the U.S. Secretary of the Navy, and many corporate clients. He writes about entrepreneurship, technology, food and other areas of great personal interest.