Top 4 Reasons Why Your Business Should Be in Good Standing

Having a good standing for a corporation or LLC is vital and a state requirement. You have already done a lot from starting your business and now your focus is on how to run it in the best way possible. The formality of your business could be the last thing you are thinking about. If you have opened a business, it is important to keep it on good terms with the state and avoid the risk of being suspended. One way of doing so is by filing a statement of information California that is mandatory in the state. Being in good standing saves you from a lot of things and it is crucial for business compliance. Here are reasons why your business needs to be in good standing.

1.     You Need a Certificate of Good Standing for Business and Financial Transactions

One important thing you need to know is that when borrowing money or doing any business transaction, you will need proof of good standing. Your lender will also need to see this proof if you need financing. Not having a good standing puts you at risk of being denied by lenders. Your transaction requests and proposals may be rejected, or you might not be able to sell your business when the time comes. Without an upright stand, it might depict that you are not in compliance, and this is very risky for any business.

2.     It Comes in Handy When Expanding to Other States

When you open a corporation in your state, the legal documents you file permit you to conduct business in the state. However, if you want to cross the borders and transact in other states, you must register with those states first. The major requirement will be to prove that your business complies with your state. Therefore, you must show you are in good standing before you are registered. You need a foreign qualification to register the business in another state, and it means being on good terms with your state first.

3.     It Saves Money

If you are not in compliance with the state regulations regarding your business, there is a high chance that the state may consider your business void or suspend it depending on what your state terms as noncompliance. Complying again means you have to pay a fee and penalties if you have been revoked. Continuing to be in noncompliance will also affect your company’s name later and once you have been reinstated, it means you will have to pick another name for your business. Fixing these mistakes is costly, and that is why being on good terms saves money.

4.     Poor Standing Has Consequences

As mentioned earlier, gaining our good standing comes at a cost. You will be blocked from access when you need financing, and cannot expand beyond your state. Furthermore, the cost of losing your company’s name is high, not to mention the interests and penalties applied. Without a good standing, you have no access to the court system, and your business is susceptible to things like theft.


Maintaining a state good stating requires an effort and taking your responsibility. You also need to pay close attention to your business compliance requirements, especially when working in different states.

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