When you run an online business, what is the first thing that comes to your mind? Most likely, it will be done by creating a site, establishing a system of payment, or placing an advertising campaign on social nets. But have you ever thought about the paperwork side of things like whether your business actually needs an existence certificate?
It is yet another such term that sounds too formal, perhaps even confusing. Most commonsense questions start like that: If you have a laptop-based online store or you freelance as a service provider, you may ask: do I need this? Or is it just for big corporations?” It can be simplified, which prompts us to consider whether online businesses actually need it.
What Exactly Is a Certificate of Existence?
It can be considered as your documental confirmation that your business is still working and in good health. A certificate of existence, also known in some states as a certificate of good standing, is issued by the state where your business is registered. It basically confirms that:
- Your business is legally registered.
- You know your annual reports, or taxes are in order.
- You’re authorized to operate within your state.
- It is basically evidence that your company actually exists, is trading and in compliance.
So the big question is that does your online business need it?
Do All Online Businesses Need It?
Not necessarily. If you’re running a small side hustle under your personal name (like freelance writing, dropshipping, or selling handmade products), you may not need a certificate at all. This is because you may be a sole proprietor and in that case typically no registration is required at the state level.
However, in the case of a business that has actually registered as an LLC or corporation, then you may very likely need to acquire and maintain a certificate of existence in order to show that your company is still in existence and in good standing.
It all depends on what type of business that you are in. Ask yourself:
- Am I registered as an LLC or corporation?
- Will I look to scale and partner or invest?
- Will I have to open a business bank account or sign up for loans?
In case the response to one of these is in the affirmative, then you will have to acquire this certificate at some point.
When Might an Online Business Be Asked for One?
You’d be surprised how often it comes up. For example:
- Establishing a Business Bank Account: Banks need assurance to know that your business is not a defaulted entity.
- Applying for Financing: When seeking a loan or line of credit, it is usually an imperative that the lenders demand.
- Partnering with Investors or Partners: Such partners or investors will seek to be assured of the legal good standing of your business.
- Increasing to other states: In cases of adding the business in other states, it is also likely to be required.
So even though your business operates online, the offline world (banks, investors, and the government) still wants formal proof.
How Do You Get One?
Good news, it’s usually straightforward. The majority of states allow you to request a certificate on the Secretary of State website. Fees vary but typically fall between $10 and $50. After requesting one, you will normally receive a copy in digital or print form that you can share at any point.
There is a twist, your business cannot receive it in case you failed to file annual reports, or pay identification fees, or just upholding any of the state requirements.
Do You Have to Worry About It Just Yet?
That depends. In the case that you are merely dipping your toes into running an online business and have not yet strictly registered it, then the likelihood is that this document is not on your schedule. However, in case you already established an LLC or a corporation it is advisable to check whether your state has this assistive requirement or not.
Think of it like insurance. It may not be necessary on a daily basis but when you need it, it could save you time or a lot of frustration.
Final Thoughts
So, do online businesses need an existence certificate? There is no one specific answer, but it depends on your business and the plans you have in your future. Sole proprietors probably will not need it, whereas LLCs and corporations do. The most important point here is, in case you are serious about either opening a bank account, applying to loans or working with investors, having an existence certificate ready can certainly make the process much simpler.
In the end it has nothing to do with red tape and more about credibility. After all, you want your business to be taken seriously as a professional enterprise, reliable, and prepared to grow. And then sometimes that official piece of paper is just that in English.