What Is a Certificate of Good Standing?
In Florida, creating a Limited Liability Company (LLC) or a Corporation requires registering with the Department of State (Division of Corporations/Sunbiz). To maintain the legal right to operate, the business must file an annual report and pay a yearly renewal fee.
A Certificate of Good Standing (also known as a Certificate of Status) is a formal, stamped document issued by the state verifying that a business entity is completely up to date on its filings, owes no state fees, and possesses the legal authority to conduct business within Florida.
Why It Is Required in Real Estate
In commercial real estate, buyers and sellers are almost never individuals; they are corporate entities (LLCs). A Certificate of Good Standing is a mandatory requirement for these transactions:
- Title Insurance — Before a title company will issue a multi-million-dollar title insurance policy on a commercial building, they must verify that the LLC selling the building legally exists. If the LLC was administratively dissolved by the state for failing to pay its annual fees, the LLC legally cannot sign the deed, and the transaction will be voided.
- Commercial Financing — A bank will not approve a commercial mortgage for a real estate investor without a Certificate of Good Standing. The bank needs absolute proof that the borrowing entity is legally permitted to sign a binding promissory note.
- Commercial Leases — Large commercial landlords will require a Certificate of Good Standing before allowing a corporate tenant to sign a 10-year commercial lease.
Loss of Good Standing
If an LLC forgets to file its annual report by May 1st, it loses its Good Standing. If it remains unpaid by the third Friday in September, the state will administratively dissolve the LLC. Once dissolved, the owners lose their corporate liability protection, meaning they can be personally sued for the business's real estate debts or slip-and-fall injuries on the property.
Related Terms
- Title Company — The entity that demands the certificate before closing
- Deed — Cannot be legally signed by a dissolved LLC
- Commercial Lease — Often requires proof of good standing from the tenant
Barnes Walker Corporate & Title Services
Barnes Walker's corporate attorneys assist real estate investors in forming Florida LLCs, filing annual reports to maintain Certificates of Good Standing, and reinstating administratively dissolved entities to ensure real estate closings proceed without delay. Request a legal inquiry for assistance.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC