What Happens if Your Business Falls Out of Good Standing

by Nadine Basri

Falling out of good standing with the Delaware Division of Corporations can have serious consequences for your business. Whether you operate a Delaware LLC or corporation, losing your good standing status can affect your legal protections, credibility, and ability to operate. In this post, we'll break down what it means to fall out of good standing, the common reasons it happens, the risks involved, and how to fix it quickly.

What Does Good Standing Mean in Delaware?

A business in "good standing" with the state of Delaware is one that has met all of its legal obligations. This means the business has:

  • Filed the required annual reports 
  • Paid franchise taxes on time
  • Maintained a registered agent in Delaware

If any of these requirements are missed or incomplete, the state can designate your business as "not in good standing." 

Common Reasons a Business Falls out of Good Standing

  1. Missed Franchise Tax Payments – One of the most common causes of a business being out of good standing. Franchise taxes are due March 1 for corporations and June 1 for LLCs and LPs.
  2. Failure to File Annual Reports – Corporations must file by March 1. LLCs are not required to file reports, but must pay franchise taxes.
  3. Registered Agent Issues – Ensure you pay annual fees and follow your agent’s guidelines. Nonpayment or misuse of the agent’s address may lead to resignation, which can render your charter inactive until a new agent is appointed and revival is filed.

Consequences of Losing Good Standing

Losing your good standing status in Delaware can create significant issues for companies. Some consequences include:

  • Inability to Obtain Certificate of Good Standing – You can’t obtain a Certificate of Good Standing, often required for financing, contracts, or expanding to other states.
  • Legal Liability Risks – You may lose some liability protections, especially if your status becomes void.
  • Involuntary Dissolution – If you don’t resolve the issue, the state can void or dissolve your business.

How to Check Your Delaware Business Status

You can check your Delaware entity's status on the Delaware Division of Corporations website for a small fee. 

If you believe you did not pay your annual franchise taxes for your LLC, LP, or GP, you can see the amount due by visiting the Annual Report and Tax Instructions page and clicking "click here to pay your taxes / file annual report". Once you enter your entity information, you will be able to see taxes due, including any accrued interest. 

How to Restore Good Standing

  • Identify the Cause – Check for missed tax payments, reports, or agent issues.
  • Pay Past-Due Taxes and Penalties – Use the Delaware Division of Corporations portal or consult a service provider. You can call us at (800) 223-3928. 
  • File Missing Reports – Catch up on any required documentation.
  • Reinstate Your Business (if Voided) – File a Certificate of Revival and pay applicable fees.
  • Update Registered Agent – Ensure that you have an active registered agent, that you have paid any applicable annual fee, and that your agent has your correct contact information. 

How The Incorporators Can Help

The Incorporators can assist you in quickly identifying your compliance status, resolving delinquent taxes and filings, preventing lapses in agent representation, and reinstating your business. Our team helps businesses avoid disruptions and stay compliant year-round. You can contact us here or give us a call at (800) 223-3928. 

Falling out of good standing isn’t ideal, but it’s usually a manageable fix if you take care of it quickly. The good news is that most issues are fixable with a little paperwork and follow-through. Stay on top of your deadlines, keep your registered agent up to date, and don’t let minor compliance slip-ups grow into bigger problems. If your business is already out of good standing, now’s the time to handle it and get back on track.

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