United States: What Is "Good Standing" - And Why Can It Affect Your Right To Do Business In The US?
Last Updated: July 25 2014

The American concept of operating in "good standing" doesn't just affect your rights – it can result in fines, loss of access to the court system, even the loss of rights to your own business name. Our US expert looks at how you can manage your entity status.

When a business owner chooses to form a corporation, LLC or LP, in the eyes of the state it is "organising" a business entity.

Once a business has been granted the right to do business in the state where it was organised, it can then secure the right to do business in other states by "qualifying" and obtaining a certificate of authority. This usually entails appointing a registered agent, filing required forms and paying fees to every state it wants to do business in.

The duly-recognised business entity must then comply with ongoing states' rules for reporting income, directors and officers and the like, and paying taxes. Companies that comply with these requirements will have their entity designated as being in "good standing" on those states' records. Entities that do not comply will have their entity status deemed delinquent, void, suspended, or dissolved. The actual designation depends upon the state, which requirement the entity has failed to comply with and how long it has been out of compliance.

Changes in entity status: the good, the bad, and the ugly facts

An entity's status can change several times during its business lifecycle. There are two categories of entity status changes: voluntary and adverse. Voluntary status changes are those that are driven by the business itself, such as expanding into new locations, leaving old ones, dissolving the business, or merging with or acquiring other businesses.

Adverse status changes are involuntary. They result from being out of compliance with state laws or requirements. All states designate different levels for adverse status. For example, Delaware, considered a business-friendly state, has several levels of entity status which allow ample opportunity for correction. Other states are stricter; for example, in Nebraska, a company's status is either "good" or "void." If a company doesn't file its biennial report by the due date, its right to do business there is automatically revoked on the very next day.

Adverse status changes can damage your ability to do business

Any entity status other than "good standing" indicates a compliance problem. Usually, problems are discovered at the worst possible time - when a business is in the middle of an expansion, a merger or an acquisition. The consequences of not being in good standing are serious, and there is a lot at stake.

  • Possible loss of access to courts: In many states, if a company loses its good-standing status, it may not bring a lawsuit in that state until good standing is restored.
  • Difficulties in securing capital and financing: Most financing companies view a loss of good standing as an increased risk, and many lenders will not approve new financing to a company that is not in good standing.
  • Tax Liens: Adverse entity status due to non-payment of taxes can result in a tax lien. Lenders are extremely wary of tax liens since they take priority over other liens.
  • Loss of name rights: Once an entity loses its good standing status, it risks losing the right to use its name in the state. Other companies may be able to acquire the rights to its name while a company is side lined due to loss of good standing.
  • Fines and penalties: States impose fines and penalties on companies that don't comply with the requirements that led to the loss of good standing. These can really add up, as cash-strapped governments have been steadily increasing their fines and penalties in recent years.
  • Personal liability: In addition to fines and penalties levied on a company not in "good standing," some states also hold individuals personally liable for conducting business on behalf of a company while it has a "revoked" status. These penalties can be stiff, ranging from $500 to $5,000 for each officer, director or employee who knowingly acted on behalf of the non-complying company.

Engaging a full-service registered agent could help

At the time a business is formed or qualified, all states require every company to name a registered agent, which serves as the recipient of legal, tax and other official notifications from the state. Some registered agents offer the most basic service of simply forwarding these legal and official notices on to the business; in contrast, full-service agents also provide a complete range of business compliance services.

A full-service registered agent is uniquely positioned to be your compliance partner. It is acquainted with the types of entities you formed, the types of businesses you are in, and the jurisdictions in which your entities operate. A full-service registered agent also has the expertise, resources and relationships with the state governments to help you stay ahead of your compliance needs.

The full-service registered agent will also:

  • Provide tools and services that automate entity monitoring and notify you about any status changes to your entities
  • Track developments in state laws and requirements, and automatically
  • Alert you when there are changes in the law that impact your business
  • Provide follow up communications to advise you of new compliance procedures.

Find out more about getting a QuickStart to the US and join our webinar on Thursday 31 July 8am EDT/8pm HKT or register for access to the free recording.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Press Releases from this Firm
Recent Content from this Firm
By Marco Sottovia
By Joanne Matisonn
By TMF Group
By Karla Fernandes
By Bethell Codrington
By Joyce Ilagan
By Jannette Pel
By Stephanie Williams, Cheryl Guerra
By TMF Group
By Sharon Yam
Font Size:
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.