Hello,

I'm Katherine Taylor, the lawyer for business owners.

I'm representing a client who is buying a business. We've been in contact with the lenders, and the lender's representative has asked me to provide a Certificate of Good Standing for my client's Maryland LLC.

So, what is that? And if you're a business owner, have you ever been asked for a Certificate of Good Standing?

I'm going to tell you what it is, why it's important, and what you can do if you find out that your business is not in good standing.

So, what does that mean?

Well, in Maryland, where I practice, if your business is deemed not to be in good standing, it basically means that you failed to file your annual report and personal property tax return, failed to pay personal property taxes, or both. That's pretty much all it means.

If you fail to take care of these requirements for too long, your company's charter can be forfeited, and that's a whole other problem. Right now, we're only talking about a lack of good standing.

So, once you find out whether your company is in good standing, why is that important?

It's important for a couple of reasons. First, if your charter is at risk of being forfeited, that can be problematic.

But it's also important because third parties doing business with your company want to know that the entity behind the business is in good standing with the state.

For instance, a lender providing financing wants to know that your business is in good standing. A seller of a business may want to know that the buyer's business is in good standing, and vice versa.

Sometimes, a landlord from whom a business owner is seeking to lease commercial property, such as office space, will also ask for a Certificate of Good Standing.

All of these third parties want to know that the business they're dealing with is in good standing with the state.

So, what can you do if your company isn't in good standing?

If the Maryland Department of Assessments and Taxation comes back and says, "Your company is not in good standing," fortunately, it's usually not too difficult to get the company back into good standing.

It typically requires filing past-due personal property tax returns or annual reports, paying any outstanding personal property taxes, and completing the necessary filings with the state.

So, the best thing you can do is check regularly to make sure your business is in good standing. I've made other videos explaining how to do that.

And as always, please like this video and subscribe. I'd love to get this information out to more business owners.

Thank you!