Is My LLC in Good Standing?

Starting a limited liability company (LLC) is a milestone achievement for any entrepreneur. However, launching your business is only the beginning. There’s an ongoing responsibility that many business owners overlook: maintaining your LLC’s good standing with the state of Ohio.

If you are an Ohio small business owner and you have ever wondered, “Is my LLC in good standing?”, you’re not alone. Many small business owners in Ohio are unaware of the specific steps required to maintain compliance after formation. Falling out of good standing can have serious legal and financial consequences—from late fees and penalties to involuntary dissolution.

Let’s explore how you can keep your LLC in good standing and why it matters.

What Does It Mean for an LLC to Be in Good Standing?

When your LLC is in “good standing,” it means your business is compliant with the administrative and legal requirements set forth by the Ohio Secretary of State and other governing agencies. Ohio’s Revised Limited Liability Company Act outlines specific requirements that must be met to maintain this status, including the proper filing of Articles of Organization and other regulatory documents​.

Good standing signals to banks, investors, state agencies, and business partners that your LLC:

• Has filed all required documents
• Is up-to-date on all state and local fees
• Is lawfully operating within the state of Ohio
• Is authorized to transact business

Maintaining good standing is essential for everything from opening a business bank account to securing loans, renewing licenses, or expanding operations.

Consequences of Losing Good Standing

Failure to comply with state statutes can cause you to lose good standing, which may result in the following consequences:

• Inability to Obtain a Certificate of Good Standing: Without this certificate, your LLC may be restricted from several business activities, such as setting up payment processing, applying for a business line of credit, gaining approval for a loan or expanding operations to another state. It can also deter potential investors and business partners, affecting your ability to grow and expand​. In addition, your LLC may not be able to file or maintain lawsuits, which can significantly impact legal proceedings and contract enforcement​.
• Loss of Business Name Rights: If your LLC loses its good standing, it may also lose the right to use its business name within the State of Ohio. This can allow other businesses to register and use your LLC’s name, causing brand confusion and potential damage to your reputation​​.
• Fines and Penalties: The state may impose fines and penalties on your LLC for failing to maintain good standing. This includes administrative fines for missed filings or late payments, which can accumulate over time and become a significant financial burden​.
• Increased Vulnerability to Identity Theft: Companies not in good standing are often more susceptible to business identity theft. This can occur when bad actors exploit the lapse in regulatory compliance to perpetrate fraud, leading to legal and financial troubles for the legitimate business owners​​.
• Dissolution: The most severe consequence of losing good standing is the possibility of administrative dissolution by the state. This means that the state can revoke your LLC’s right to operate, effectively shutting down your business. Reinstating a dissolved LLC can be a lengthy and complex process​.

Once you lose good standing, the state typically will not issue a new certificate until the current one expires. You may be granted a short grace period to remedy the issue that caused a loss of good standing. While recovering good standing may simply be a matter of sending a check or filing a document, it is best to avoid problems in the first place to prevent interruptions in your LLC’s good standing.

Steps to Keep Your LLC in Good Standing

Even a temporary loss of good standing can severely impact your business. Maintaining your LLC’s good standing is not difficult, but it requires attention to detail and can be time-consuming. Follow these key steps to maintain your LLC’s good standing in the state of Ohio:

• Amend the Articles of Organization

Any significant changes to your business, such as a name change, a change in the registered agent, or alterations to your LLC’s financial, taxation, or management structure, may require an amendment to your articles of organization. Each state has specific triggers for amendments, so it’s essential to stay informed about Ohio’s requirements and promptly file necessary updates with the Ohio Secretary of State.

• File State and Federal Taxes

LLC members often pay quarterly estimated taxes, especially if treated as self-employed individuals. Your LLC’s tax obligations may differ based on whether an LLC is filing as a sole proprietorship, partnership, S corporation, or C corporation. Ensure you meet all Ohio and federal tax deadlines to avoid penalties.

• Renew Business Licenses and Permits

Various licenses and permits, such as health permits, occupational licenses, and zoning permits, need to be renewed regularly. Ohio has specific renewal rules. Stay updated on these requirements to maintain your LLC’s compliance.

• Resolve Criminal Activity Charges

Any criminal activity involving the business or its owners can jeopardize your LLC’s good standing. Pending charges should be promptly addressed.

• Maintain Internal Compliance

Compliance responsibilities may span several departments within a business (such as finance, legal, and tax), which drives the need for clear communication and up-to-date monitoring of state requirements. Carefully coordinate compliance tasks to ensure they do not fall through the cracks due to internal miscommunication.

Practical Tips for Staying Compliant

Being proactive is key to ensuring your LLC remains in good standing. Here are some steps you can take to stay ahead of compliance requirements:

1. Hire an Ohio business attorney or CPA for regular checkups.
2. Regular Compliance Reviews: Schedule periodic reviews of your LLC’s compliance status. This helps identify potential issues early and allows for timely resolution.
3. Create a Compliance Calendar: Maintain a detailed calendar that includes all important compliance deadlines, such as filing dates for annual reports, tax payments, and license renewals. Set reminders well in advance to avoid last-minute scrambles.
4. Internal Compliance Audits: Conduct regular internal audits to ensure that all compliance-related activities are handled properly. This includes reviewing financial records, legal documents, and state filings to ensure that everything is up to date.
5. Training and Education: Provide ongoing training for employees involved in compliance-related tasks. Ensure they are aware of Ohio-specific requirements and any changes in regulations.
6. Hire a Compliance Officer: For larger LLCs, consider hiring a dedicated compliance officer to oversee all compliance activities. This person can coordinate across departments and ensure that all compliance obligations are met.

By implementing these proactive measures, you can ensure your LLC stays compliant with state requirements, thereby avoiding the pitfalls that could jeopardize the good standing of your business.

Case Studies of Compliance Failures

Learning from the mistakes of others can be a powerful way to understand the importance of maintaining good standing for your LLC. Here are a couple of examples of businesses that faced serious repercussions due to simple compliance errors:

Case Study 1: Incorrect Tax Filings
An LLC operating in several states, including Ohio, made errors in its Ohio state tax filings, leading to significant penalties and a temporary loss of good standing. The business had to engage a tax professional to resolve the discrepancies and restore its compliance status, which was both time-consuming and costly.

Case Study 2: Failure to Renew Business Licenses
An Ohio restaurant forgot to renew its liquor permit on time. This lapse resulted in fines and a temporary shutdown of the business. The restaurant had to expedite the renewal process and pay late fees to resume operations.

You Earned Your Good Standing. Do Not Let It Slip Away.

Your LLC is more than a legal entity—it’s the engine powering your vision, your finances, and your future. But one missed form, tax payment, or license renewal can derail years of effort.

At Rhodium Law, we help Ohio small business owners like you stay in good standing so that you can focus on growth. To stay on top of your LLC status obligations, consider scheduling regular consultations with a seasoned business attorney, particularly if your LLC has a complex structure or operates across multiple states. Contact us today to schedule a consultation and learn how we can help you help your business to stay in good standing.