Business Compliance and Good Standing

A Delaware corporation's business compliance and good standing status with the state is very important to its continued ability to conduct business. Corporations and LLCs must abide by business compliance and remain in good standing in order to maintain full asset protection, obtain a business loan, renew a business license, register for Foreign Qualification in order to do business in other states, or even sell your business.

To maintain corporate compliance, businesses must adhere to a number of laws and obligations that vary by state. Some of these include maintaining a Registered Agent, paying your taxes and fees, filing annual reports on time, and retaining all necessary licenses for your business.

Companies that maintain proper business compliance and are current with all Delaware annual fees are able to obtain a Certificate of Good Standing whenever they may need one (also known as a Certificate of Existence). This certificate is a letter from the Delaware Secretary of State that declares the corporation is in good standing and all Delaware taxes are current. A Certificate of Good Standing is typically required to operate your business in another state, purchase or sell real estate, open a company bank account or obtain a loan from a bank.

In order for your corporation status to remain in good standing with the state of Delaware, you must file your annual Franchise Tax and pay your Registered Agent Fee. Failure to do so could result in your company being assigned one of the following statuses:

• Void: A corporation obtains this status if it has failed to file its Delaware Franchise Taxes for two consecutive years. Please note that failure to file the annual Franchise Tax by March 1 of each year will also result in a late penalty and monthly interest. Foreign corporations can also earn a void status by failing to final an annual report within a two-year period. Learn more by reading, “My Delaware Corporation Was Voided. Now What?” 
• Forfeit: Corporations that fail to maintain a Delaware Registered Agent -- either because it failed to pay the annual fee or because the registered agent resigned and a new one wasn’t chosen within 30 days -- acquire this status.

Loss of good standing can be detrimental to your business. In addition to the late penalties and interest that come with failure to comply, a business owner may even experience personal liability if their company becomes void or forfeit.

A corporation can also obtain a Canceled status, but the company will only be officially canceled if it has filed a Certificate of Dissolution and paid the necessary fees to formally dissolve the business entity.

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