Operating status indicates whether a business is actually conducting operations—distinct from its registration status in government records. A business can be "active" in Secretary of State filings while having ceased operations, or be actively operating while administratively dissolved.
Registration Status vs. Operating Status
The Distinction
Registration status
- What It Shows: Legal standing in state records
- Source: Secretary of State
Operating status
- What It Shows: Whether business is actually active
- Source: Activity signals
These often align, but not always:
Active
- Operating: Active
- Scenario: Normal operating business
Active
- Operating: Inactive
- Scenario: Registered but dormant or defunct
Dissolved
- Operating: Active
- Scenario: Operating despite administrative dissolution
Dissolved
- Operating: Inactive
- Scenario: Properly wound down
Why They Diverge
Active registration, inactive operations:
- Owner stopped operating but didn't dissolve
- Holding company with no active operations
- Business formed but never launched
- Seasonal business during off-season
Dissolved registration, active operations:
- Failed to file annual reports (administrative dissolution)
- Owner unaware of compliance requirements
- Operating under different entity name
- Recently dissolved, still winding down
Determining Operating Status
Positive Indicators
Signals that a business is actually operating:
Transaction activity: Payment processing, banking activity
Web presence: Active website, recent social posts
Customer reviews: Recent reviews on Google, Yelp
Physical presence: Open operating location
Employment: Active employees, hiring activity
Licensing: Current professional/business licenses
Tax filings: Recent tax returns showing revenue
Negative Indicators
Signals that a business may not be operating:
No transaction activity: No payment processing for extended period
Dead web presence: Website down, abandoned social accounts
No recent reviews: Customer activity stopped
Closed location: Physical location shuttered
No employees: No payroll activity
Expired licenses: Required licenses not renewed
Phone disconnected: Primary business contact inactive
Ambiguous Cases
Some situations require judgment:
- New businesses may lack operating history
- Seasonal businesses have natural inactive periods
- Business model changes may shift visible signals
- Privacy-conscious businesses minimize footprint
Operating Status in KYB
Verification Value
Operating status verification adds critical context:
- Registration confirms legal existence
- Operating status confirms actual business activity
- Together they paint a complete picture
Risk Implications
Registered, not operating: May indicate shell company, dormant fraud vehicle
Operating, not registered: Compliance issue, may indicate avoidance
Recently stopped operating: Heightened risk, business may be failing
New, limited signals: Needs monitoring, track as it develops
Operating status affects verification decisions:
- Strong operating signals → higher confidence
- No operating signals → may need investigation
- Conflicting signals → likely needs manual review
Data Sources for Operating Status
Direct evidence of activity:
- Bank and payment processor data (transaction volumes)
- Tax authority data (revenue, payroll)
- Utility records (active service)
Observable Signals
Indirect but valuable indicators:
- Website and social media activity
- Google Business Profile (open/closed, reviews)
- Maps and location data
- Job postings
- Press coverage
Historical Patterns
Trends over time reveal status:
- Declining transaction volumes
- Website going offline
- Reviews stopping
- Location closing
Special Cases
Holding Companies
Legitimate holding companies may show:
- Active registration
- No direct operating signals
- Subsidiary companies that are operating
- Real but indirect economic activity
This isn't necessarily problematic—context matters.
Shell Companies
Shell companies often show:
- Active registration
- Minimal or no operating signals
- Only registered agent address
- No identifiable business activity
Operating status signals help identify potential shells.
Seasonal Businesses
Seasonal patterns require adjustment:
- Tax preparation (busy January-April)
- Landscaping (seasonal by region)
- Tourism (peak seasons vary)
- Retail (holiday concentration)
Apparent inactivity during off-season is normal.
New entities have limited operating history:
- Recent formation date
- Few or no transactions yet
- Building web presence
- Establishing operations
Risk assessment should account for business age.
Monitoring Operating Status
Ongoing Verification
Operating status changes over time:
- Businesses that were active may cease operations
- Previously dormant entities may become active
- Status should be periodically reassessed
Trigger-Based Review
Events that warrant status reassessment:
- Large transaction after period of inactivity
- Change in registration status
- Address change
- New ownership signals
- Customer complaints or disputes
Continuous Monitoring
Advanced approaches monitor signals continuously:
- Transaction velocity changes
- Web presence changes
- Review activity changes
- Trigger alerts when patterns shift
Key Takeaways
- Operating status ≠ registration status—a registered business might not be operating
- Multiple signals indicate operating status—transactions, web presence, location, employees
- Shell company detection relies on operating status—registration without operation is suspicious
- Context matters—holding companies, seasonal businesses, and new entities require nuance
- Operating status changes—ongoing monitoring detects shifts
- Better operating status data improves verification—fewer false positives and negatives
Related: Operating Location | Shell Company | Entity Verification | Ground Truth
