Businesses must fulfill certain compliance requirements to stay in good standing with each state in which they are registered with the Secretary of State. These specific responsibilities vary from state to state.
Common requirements for staying in good standing include:
- Paying taxes on time (federal, state, and local income tax; sales tax; franchise tax)
- Filing an annual report on time and submitting other mandatory documentation
- Obeying local zoning and permitting requirements
- Keeping business and professional licenses current
- Maintaining a registered agent
- Following all corporate rules (e.g., holding required meetings and preparing minutes; maintaining a board of directors; following bylaws, etc...)
If a business does not maintain compliance per a state's requirements, that business then falls out of good standing and is considered in bad standing. Other terms for this may include "not in good standing," "forfeited," or "suspended.”
There are many negative ramifications associated with falling out of good standing, including:
- Fines and penalties
- Administrative dissolution in the state
- Possible loss of access to the courts
- Tax liens
- Company owners' personal assets become at risk
The steps for getting reinstated into good standing vary from state to state. Generally, it will require the payment of any outstanding taxes, fines, or fees and any other required compliance documentation.