Maintaining Good Standing
A Certificate of Good Standing is a crucial document that indicates that your business has all the necessary licenses and permits, is paying all the franchise taxes, and has all the updated annual reports. The document is a piece of primary evidence that your business has a legal existence, history, and authority to undertake its operations in a particular state.
What a Certificate of Good Standing Means in SD
To begin with, it is essential to note that the state of South Dakota does not obligate its citizens to have a mandatory Certificate of Good Standing to operate a domestic company or business. However, for someone who needs to start and run a business, especially a LLC in South Dakota, it would be best to have a Certificate of Good Standing.
The Certificate of Good Standing would show that your company has a legal registration and existence in the state. It would also indicate that you have complied with the relevant laws of South Dakota, filed your annual business reports, and paid the required state taxes.
Where to Obtain a Certificate of Good Standing
South Dakota has the Secretary of State Office that provides registered business owners in the state with a Certificate of Good Standing. The office suggests two primary ways for applying for the Certificate of Good Standing. You can either visit the Secretary of State official website and apply online.
You have to process some payment before you are verified and the document made ready for download in PDF format. The application form has various requirements that facilitate payments, such as your corporate Identity Card, company name, etc. Once you have entered the necessary information required, you will need to deposit $20 in order to obtain the Certificate of Good Standing. However, you can expedite the document by paying $50.
What Does a Certificate of Good Standing Contain?
Primarily, the Certificate of Good Standing has a state seal and the signature of South Dakota’s Secretary of State. The document suffices for Limited Liability Companies, Business Corporations, and Limited Liability Partnerships. Thus, any of them can apply to the Secretary of State Office to obtain the document. A Certificate of Good Standing contains the following information:
● The name of the business entity.
● The date you established the business in South Dakota.
● An indication and verification that the business filed all the required documents with the Secretary of State office and paid all the required fees.
● A confirmation and an assurance that the business entity has a good standing with the state.
● A declaration that the Certificate of Good Standing does not in any manner recommend, endorse or offer approval of the financial status or the standard operations of the business entity.
How Crucial is a Certificate of Good Standing in SD?
According to the state laws in South Dakota, it is a mandatory requirement for one to have a Certificate of Good Standing in order to operate a business in the state. Not only does the Certificate of Good Standing help you in legally running your business, but it also helps you to obtain loans from financial institutions, to obtain an insurance policy, or to open a bank account. These are briefly discussed below.
Registering Your Business in Another State
Any business owner desires to grow and expand their business. As a result, you may consider expanding your business in other states that have broader and more lucrative markets. Suppose you do that, your business entity would become an out-of-state Limited Liability Company or Corporation in that state.
Now, most states would not easily authorize you to run a business in their jurisdiction unless they are guaranteed that you are legit. Therefore, you will need a Certificate of Good Standing from South Dakota to indicate that you are legit and have complied with all the statutory requirements of South Dakota.
Obtaining Financial Support
For most business persons, it becomes necessary to seek financial support either during the formation of a business or after its establishment to cover the operation costs. However, most financial institutions like investors, banks, or credit unions would need the assurance of your creditworthiness and proof of your legitimacy. A Certificate of Good Standing is such a piece of primary evidence that would easily convince your loaners to release the money to you.
Getting a Business Insurance Policy
The laws of South Dakota mandate business owners to have mandatory insurance policies to cover professional malpractice, general liability, and employees’ compensation claims. To obtain these, you will need to show proof of your business existence, thus the necessity of having a South Dakota Certificate of Good Standing.
Opening a Business Bank Account
It is not a very good idea to mix personal finances with business finances. Therefore, it is essential that you have a separate business bank account for keeping business finances. However, in order to successfully open a business bank account, the bank would require proof of the existence of the legitimate business entity. Once again, a Certificate of Good Standing would be your solid proof of such existence.
Formation of Valid Contracts with Other Businesses or the State
As already mentioned, a Certificate of Good Standing is a valid proof of the existence and history of your business entity. You can easily enter into valid contractual agreements with other business entities or the state with it in your possession.
Renewing Business Licenses and Permits
As a business operator in South Dakota, you will be required to regularly renew your business permits and licenses. Since the Certificate of Good Standing shows proof of your business legitimacy, it may speed up the process for you.
Selling Part of the Business
It may reach a point when you consider selling or transferring part of your business entity. The buyers or investors would probably want to be assured that you are legitimate, have legal standing and goodwill. When you attach and show them the Certificate of Good Standing, they will be more satisfied with you.
Ensure You Are Compliant
Before you make arrangements to apply for the Certificate of Good Standing from the Secretary of State in South Dakota, it is best that you comply with all the requirements. It would help to pay all the state taxes, file all the necessary documents, file all your annual business reports, and make the necessary fee payments.
Once you obtain the Certificate of Good Standing, you do not need to worry about its validity. As per the state’s laws, a Certificate of Good Standing does not have a specific date of expiration. However, it is essential to note that various institutions such as banks, foreign business states, etc., may always impose their expiration dates for the validity of the Certificate of Good Standing.
Remember, it may not be a mandatory requirement for every business in South Dakota to have a Certificate of Good Standing; however, it is very vital that you have one as a business operator. To ensure you are compliant with the business requirement in South Dakota have a registered agent on hand.