Franchise and Business Scams

Before you begin any business venture, you should do research to make sure that there is not fraudulent activity going on. Before you sign any legal agreement or documentation you should check with a reputable attorney. They can guide as to what you should look for, and what are red flags for a particular business. In general, you should look for a company that has proven itself. The longer they have had the business the better for you.

If you are looking into starting a franchise or a business opportunity, the most important document you should look at is a Uniform Franchise Offering circular. This discloses required information about the franchise organization. It should have a part of it as an audited financial statement prepared by a certified public accountant. If it makes a statement about how much money you can earn, this needs to be supported by separate verifiable proof. You should also get a list of existing franchisees. Do your research by contacting them and visiting their locations.

If you have issues or concerns with the franchise, you can call U.S. Federal Trade Commission. Also, you can see what the National Fraud Information Center (www.fraud.org) says about the organization. Other places you can check are Franchise Chat (www.franchise-chat.com/forum), Rip-Off Report (www.ripoffreport.com/reports/ripoff1602.htm), the Better Business Bureau, the Attorney General's office, or even the your Postal Service.

If you are taking over a business there are several things you should look for. Ask to see books and tax returns. Make sure that you are looking at these with your accountant. Run a credit check on the business. A Dun and Bradstreet report can cost you from $99.99 for a basic to $139.99 for a comprehensive report. Take a look at the legal documents. This will tell you what obligations you will be required to make if and when you take over the business. Before you can do any of this information, you may be asked to sign a letter of intent.

If you want to do Network Marketing, use your instinct. If it sounds to good to be true, than it probably is. These are some red flags you should watch out for. If the company promises you lots of money or guarantees that you will make money. If the amount of money that you need to spend up front greatly exceeds the benefit of anything you get. They claim that high income is easy to get. You are pressured to sign up as a distributor. If you have other questions or concerns there is a Direct Seller's Association Code of Ethics. If you have questions or concerns check with the U.S. Federal Trade Commission Division of Marketing Practices, or with the National Fraud Information Center.

Information from The Idiot's Guide to Home Based Businesses