Key Takeaways

  • Keeping your LLC in good standing is essential for legal compliance, business credibility, and financial opportunities.
  • Regularly file annual or biennial reports and pay state fees, franchise taxes, and other required business taxes on time.
  • Maintain a registered agent and update your LLC’s information promptly when changes occur.
  • Draft and follow an operating agreement, hold meetings if required, and document major decisions.
  • Good standing helps you secure loans, attract investors, expand into other states, and avoid penalties or dissolution.

Good Standing for Your LLC

LLC good standing is the state of being up-to-date with any reports you need to file and being compliant with all the rules and regulations that apply to your LLC, or limited liability company.

A Certificate of Good Standing (also known as a Certificate of Authorization or a Certificate of Existence) is a state-issued document that certifies that your LLC is considered to be in good standing in the eyes of the state and is authorized to do business therein. A Certificate of Good Standing may often be required to take out a business loan, file business taxes, or renew business licenses. It also will show that a business entity has a registered agent and has not had to file for dissolution.

Certificates of Good Standing may vary in their particulars between states, but the basic information they will contain usually includes your LLC’s name, text assuring that your LLC is allowed to do business within the state, and perhaps a seal or some other sign of authenticity.

In order to remain in good standing, an LLC should meet the following requirements:

  • Be up to date on any fees, annual, biennial, or otherwise, that the Secretary of State requires.
  • Be up to date on filing any reports, annual, biennial, or otherwise, that are required.
  • Be up to date on paying any franchise taxes or business fees that are required.

If this is done, then your LLC will be said to be in good standing. This is a desirable state to be in because in the course of running your LLC, the Certificate of Good Standing may be required to conduct a wide variety of business. For example:

  • If you are applying to other states for foreign qualification to do business there, their governments may request to see your Certificate of Good Standing before they authorize your request.
  • If you are applying for a loan from a bank or other lender, they may wish to see your Certificate of Good Standing to verify that your LLC exists, that it has a good business history, and that it has good credit.
  • If you are courting potential business partners or investors, they may want to see your Certificate of Good Standing as an assurance that you are a legitimate business partner with a track record of being in compliance with regulations and laws.
  • If you are seeking to obtain or renew a permit or license, the regulators of such documents may request to see your Certificate of Good Standing before they give you their approval.
  • If you desire to sell your business, potential buyers may want to see your Certificate of Good Standing as proof of the existence of the business and its compliance with regulations and laws.

Because of all this, you do not want to let your LLC fall out of good standing. If it does, it may be very difficult to conduct business.

Why Maintaining Good Standing Matters

Remaining in good standing is more than just a compliance checkbox — it’s a foundational aspect of running a legally sound and financially healthy business. When your LLC is in good standing, it signals to lenders, investors, partners, and regulators that your company is reliable, compliant, and properly managed. Falling out of good standing, on the other hand, can result in severe consequences, including fines, the loss of limited liability protection, and even administrative dissolution of your LLC.

Some of the most important benefits of maintaining your LLC’s good standing include:

  • Preserving limited liability: Staying compliant ensures that your personal assets remain protected from business liabilities.
  • Securing financing: Lenders often require a Certificate of Good Standing before approving business loans or lines of credit.
  • Expanding into new markets: Foreign qualification applications typically require proof of good standing in your home state.
  • Building trust: Business partners, investors, and clients view compliance as a sign of professionalism and stability.
  • Avoiding penalties: Noncompliance can result in state-imposed fines, late fees, or even loss of your company’s legal status.

Good Standing for Other LLCs

If you desire to find out if another LLC is maintaining its good standing, you may search your state’s Corporation/LLC Database by LLC name or file number. By doing so, you will be able to see a File Detail Report pertaining to the LLC or obtain a Certificate of Good Standing for an LLC, if it has one. A File Detail Report includes the LLC’s basic information, such as:

  • LLC name
  • Formation/registration date
  • Duration
  • Jurisdiction
  • Address and name of its registered agent
  • Status as member-managed or manager-managed
  • The last date of filing for the annual report

A Certificate of Good Standing may be ordered for a small fee, varying from state to state. If you pay with credit card, you can print the certificate yourself once the transaction has been approved. There may be a small fee (minimum of $1) for credit card transactions.

In addition to the business benefits of staying in good standing, the fact that anyone can see if your LLC is in good standing at any time may be another incentive to maintain good standing.

Restoring Good Standing if You Fall Out of Compliance

If your LLC has lost its good standing, it’s often possible to restore it — but the process varies by state and the nature of the violation. In general, you’ll need to:

  1. Submit overdue filings: File any missing annual or biennial reports immediately.
  2. Pay outstanding fees and penalties: Bring all taxes, state fees, and late charges up to date.
  3. Reinstate your registered agent: If the agent information is outdated or missing, appoint a new one and file the necessary paperwork.
  4. Apply for reinstatement: Some states require a formal reinstatement application or a Certificate of Reinstatement before your LLC regains good standing.
  5. Review ongoing compliance procedures: Implement internal systems — like compliance calendars or registered agent services — to prevent future lapses.

Common Reasons LLCs Lose Good Standing

Many business owners lose their LLC’s good standing simply by overlooking routine tasks. Understanding common mistakes can help you avoid them:

  • Missed filing deadlines: Late or missed annual reports are one of the top causes of losing good standing.
  • Unpaid taxes or fees: Neglecting franchise taxes, state filing fees, or other business obligations leads to penalties and possible suspension.
  • Lapsed registered agent service: If your registered agent leaves and you fail to designate a new one, your LLC risks losing its legal standing.
  • Failure to maintain records: Inadequate documentation of company decisions can cause issues in audits or legal disputes.
  • Neglected licenses or permits: Operating without current permits can trigger regulatory action and affect your LLC’s legal status.

Steps to Keep Your LLC in Good Standing

Understanding how to keep your LLC in good standing involves ongoing attention to legal, tax, and administrative requirements. Here’s a breakdown of the most critical steps every LLC owner should follow:

  1. File Annual or Biennial Reports on Time
    Most states require LLCs to file periodic reports — often annually or biennially — detailing updated ownership, management, and registered agent information. Missing these deadlines is one of the most common reasons businesses lose good standing.
  2. Pay State Fees and Franchise Taxes
    States charge maintenance fees, franchise taxes, or both. These payments must be made on schedule to avoid penalties, suspension, or dissolution.
  3. Maintain a Registered Agent
    Every LLC must have a registered agent with a valid physical address in the state. If your agent resigns or changes address, update the state immediately.
  4. Keep Accurate Business Records
    Even if your state doesn’t require formal meetings, maintaining records of major decisions, financial statements, and member approvals helps demonstrate compliance and protect your LLC’s liability shield.
  5. Operate Under an Operating Agreement
    A well-drafted operating agreement clarifies roles, responsibilities, and procedures, reducing disputes and demonstrating proper governance.
  6. Update Business Information Promptly
    Notify the state of any significant changes, such as changes in ownership, management structure, or business address. Delays in updates can affect your legal status.
  7. Maintain Required Licenses and Permits
    Many LLCs need local, state, or federal licenses to operate legally. Failing to renew or maintain these can jeopardize your good standing.

Frequently Asked Questions

  1. What happens if my LLC loses good standing?
    You may face penalties, lose limited liability protections, and risk administrative dissolution. It can also harm your ability to secure financing or expand into new states.
  2. How often do I need to file reports to stay in good standing?
    Most states require annual or biennial reports. Check your state’s specific requirements and set calendar reminders for deadlines.
  3. Can my LLC operate if it’s not in good standing?
    While you might still conduct business, you may be unable to sign contracts, sue in court, or obtain financing until your status is restored.
  4. How much does it cost to reinstate an LLC?
    Costs vary by state but typically include filing fees, late penalties, and any overdue taxes or annual fees.
  5. Do I need a lawyer to maintain or restore good standing?
    While not legally required, an attorney can ensure compliance, handle filings correctly, and help reinstate your LLC if needed.

If you need further help understanding or maintaining LLC good standing, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5-percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience including work with, or on behalf of companies like Google, Menlo Ventures, and Airbnb.