Why Buyers Ask for a Certificate of Good Standing Before Closing a Deal

The catch that catches sellers off guard

Here is the part that surprises first-time sellers. A state will not issue a certificate of good standing to an entity that owes back fees or missed an annual report. The same goes if the registered agent lapsed. The certificate does not create good standing; it only confirms good standing that already exists. If the LLC fell behind at any point, the seller has to fix the underlying problem first. Then wait for the state’s records to catch up. Only then can they request the document a buyer is waiting on.

The usual suspect is a missed annual or biennial report. An unpaid franchise tax or filing fee causes it too. So does a registered agent who resigned and was never replaced, though that one is rarer. Any of these is enough to knock an entity out of good standing, and a business owner who has been focused on running the company for the past three years may not know which one, if any, has quietly happened.

Many owners avoid this altogether by using a registered agent service to track renewals instead of relying on memory, comparing options based on price, state coverage, and how far ahead they send renewal reminders. A missed deadline is one of the most common ways an LLC drifts out of compliance without the owner ever noticing.

Delaware is the state most people assume moves fastest, and for LLCs it usually does, since Delaware LLCs owe a flat annual tax rather than filing a report at all. As of 2026, every Delaware LLC owes a flat annual tax by June 1 each year, with no annual report required, according to the Delaware Division of Corporations. That tax has been $300, but Delaware House Bill 400, signed in May 2026, raises it to $400 starting with the 2026 tax year; the higher amount is first due on the June 1, 2027 payment, so a seller checking the number today should confirm which figure currently applies before promising a buyer anything in writing. Missing the deadline, under either amount, adds a $200 penalty, and the entity loses good standing until the balance clears. Pay it, and a certificate can often be ordered the same business day, since Delaware’s certification fee schedule currently includes a same-day priority tier on top of the standard $50 short-form or $175 long-form certificate fee. Owners weighing which formation service to use for a Delaware entity can compare options through best LLC formation service in Delaware.

Texas does not even call it that

Texas complicates the picture in a different way. The Comptroller’s office no longer uses the term “certificate of good standing.” As currently structured, what a business partner needs instead is two separate documents: a Certificate of Account Status from the Comptroller confirming franchise tax compliance, and a Certificate of Fact from the Secretary of State confirming the entity has not forfeited its registration. Franchise tax reports and the accompanying Public Information Report are currently due May 15 every year, according to the Comptroller’s office, and missing that deadline can eventually lead to forfeiture. At that point, neither certificate is available until the entity files a tax clearance letter and reinstatement paperwork with the Secretary of State. A seller who assumes good standing is a single, one-word answer in Texas is already behind. Sellers forming or reorganizing a Texas entity can compare formation providers through LLCBuddy’s roundup of the best Texas LLC services.

Reinstatement beats starting over, and still is not free

When an LLC has lapsed, reinstating it is often described as preferable to dissolving it and forming a new entity, since reinstatement preserves the original formation date and continuity of the business. Existing contracts stay intact too. But it is not a formality, and the timeline varies more than sellers expect. In Maryland, for example, the State Department of Assessments and Taxation sets the base filing fee at $100 for standard processing, which the state’s own materials put at four to eight weeks depending on which SDAT document you check. Paying an additional $50 gets expedited review within 7 to 10 business days. Same-day service costs considerably more: an additional $325 if filed online, or $425 for documents delivered in person to SDAT’s Baltimore office, on top of whatever back reports and penalties triggered the forfeiture in the first place. That is a manageable timeline with six months of runway before a sale. It can be a far more difficult conversation to have with a buyer’s attorney three weeks before closing.

Why the deadline pressure cuts one way

A buyer who asks for a certificate of good standing thirty days before closing is being generous. A buyer who asks for one three days before closing is testing whether the seller’s paperwork is as clean as the pitch. Sellers who have not checked their entity’s compliance status since formation are usually the ones caught flat, because annual report deadlines are unglamorous, they get delegated to whoever handled the original filing, and they are easy to lose track of after a registered agent resigns or an office address changes. None of that is a problem until a buyer’s attorney asks for proof of standing and the state comes back with a deficiency notice instead of a certificate.

There is also a shelf-life issue that has less to do with statute and more to do with standard business practice. Multiple registered-agent and title-service providers note that organizations commonly decline to accept a certificate more than thirty to sixty days old, since the document only certifies status as of the date it was issued. Order one too early in the process, and a seller can end up ordering a second one right before closing anyway.

What to fix before a buyer ever shows up

The fix is boring, which is exactly why it works. Many sellers start by checking the entity’s status on the secretary of state’s website before a deal is even on the table. They confirm the registered agent is active and reachable, and file anything overdue rather than waiting for a buyer to surface the gap. Once the entity appears current, some owners order a certificate as a dry run, on the theory that a hold or an unresolved filing is far better to learn about with no closing date on the calendar than three days before one.

Most owners do not think about their certificate of good standing until someone else asks for it, which tends to be the worst possible moment to start.

This is not legal advice, but the stakes are real

None of the above is legal or tax advice, and the details vary enough by state, and by how long an entity has been out of compliance, that a seller facing a real deadline may want to consult an attorney or the relevant state office directly rather than rely on a blog post for the final answer. LLCBuddy is not a law firm or a licensed filing service, and it does not file documents on anyone’s behalf. What it publishes can help an owner find out, well before a buyer is ever involved, whether the LLC is currently the compliant, active company the pitch deck assumes it is.

A certificate of good standing is one page. Earning one, after an LLC has drifted out of compliance, can take longer than the closing calendar allows.

FAQs for Certificates of Good Standing

What is a certificate of good standing?

It is a document issued by a secretary of state or comparable office confirming that an entity is registered, current on its required filings and authorized to transact business. Buyer’s counsel asks for it to verify the company is active and compliant before closing.

Why can a state refuse to issue one?

A state will not issue a certificate to an entity that owes back fees, missed an annual report or lost its registered agent. The certificate only confirms good standing that already exists, so the underlying problem has to be fixed first.

How much does Delaware charge an LLC each year?

Delaware LLCs owe a flat annual tax by June 1 with no annual report. It has been $300, and House Bill 400 raises it to $400 starting with the 2026 tax year, first due June 1, 2027, so check which figure applies. Missing the deadline adds a $200 penalty.

Does Texas issue a certificate of good standing?

Not under that name. A business partner needs a Certificate of Account Status from the Comptroller and a Certificate of Fact from the Secretary of State. Franchise tax reports are currently due May 15 every year.

How old can a certificate of good standing be?

Organizations commonly decline a certificate that is more than thirty to sixty days old, because it only certifies status as of the date it was issued. Ordering too early can mean ordering a second one before closing.