Certificate of good standing

Definition

A state's written proof that a company still legally exists and has filed.

Why It Matters

The state issues it only when the entity's annual reports are current and its franchise or filing fees are paid, so it is a one-page test of whether the company you are buying has kept its own paperwork. Lenders ask for it before closing and so does the closing agent, and a company that cannot produce one is not necessarily in trouble, but it has an administrative problem someone has to fix before money moves. Ask early rather than at signing, because reinstating a lapsed entity takes weeks in some states.

In numbers: Most states issue one for $10 to $50 within a few days, and reinstating a lapsed entity can run several hundred dollars plus every missed annual fee.