Is Your Business in "Good Standing?"
Maintaining your business's good standing status is essential for legal and operational health. Here's why it's critical and what risks are involved if you don't comply.
What Does "Good Standing" Mean?
A business in good standing is one that complies with all state requirements and regulations. This means the business has filed all necessary reports, paid all required fees and taxes, maintained up-to-date business licenses and permits, and followed any other regulatory requirements. Being in good standing signifies that the business is legally recognized and authorized to operate within the state.
Risks of Not Maintaining Good Standing
Legal Consequences
- Non-compliance can lead to fines, penalties, and dissolution of your business.
- You risk losing limited liability protection, exposing personal assets to business liabilities.
Reputation Damage
- A business not in good standing appears unreliable and unprofessional, deterring clients, partners, and investors.
Loss of Financing Opportunities
- Proof of good standing is often required by lenders and investors. Without it, accessing loans and investment can be difficult.
Increased Costs
- Non-compliance incurs late fees, penalties, and reinstatement costs, diverting resources from core business activities.
Operational Disruptions
- Compliance issues can lead to disruptions, taking focus away from growth and innovation.
Doing Business in Other States
If your business operates in multiple states, maintaining good standing in each jurisdiction is crucial. This involves:
- Foreign Qualification: Registering your business as a foreign entity in states outside your home state to ensure it is legally recognized and allowed to operate there.
- Meeting State-Specific Requirements: Complying with each state's filing and fee requirements, which may include annual reports, franchise taxes, and other obligations.
- Adhering to Regulatory Requirements: Following the unique regulations of each state to avoid penalties and ensure seamless operations across state lines.
Neglecting to register in other states where you do business can lead to fines, back taxes, and even being barred from doing business in those states. It's essential to research and comply with the registration requirements of each state to maintain your good standing.
Resolving a "Not in Good Standing" Status in Maryland
In Maryland, a business "not in good standing" is non-compliant with state laws. To regain good standing, address the specific issues:
Common Issues:
- Missing Annual Report and Business Personal Property Return (Form 1).
- Late filing penalties.
- Dishonored payments.
- Inactive resident agent.
- Issues with the Maryland Office of the Comptroller or Department of Labor.
Steps to Resolve:
- File missing reports (Form 1) online or by mail.
- Pay penalties through the Maryland Business Express or Central Collection Unit if referred.
- Resolve dishonored payments with money orders or certified checks.
- Appoint a new resident agent if needed.
For forfeited businesses, additional steps include filing specific documents (e.g., Articles of Revival) and paying outstanding fees and penalties.
For detailed guidance, visit the Maryland Department of Assessments & Taxation website or contact their Charter Legal Department.
Stay Compliant
Maintaining good standing is essential for avoiding legal risks, protecting your reputation, securing financing, and ensuring smooth operations. Ensure your business remains compliant to thrive in the competitive marketplace.
For assistance with keeping your business in good standing, schedule a free consultation today.
Find out if your business is in good standing in Maryland HERE.
Disclaimer: This blog post is for informational purposes only and does not constitute legal advice. For legal advice, please consult a qualified attorney.