Avoiding Business Opportunity Fraud
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Steps to Take to Protect Yourself
Read the Disclosure Document
The promoters of certain business opportunities are required by federal and Washington state laws to provide potential investors with complete disclosure in the form of a disclosure document at least 48 hours, and up to 10 working days before they sign any agreement or invest any money.
If the promoter has no disclosure document, beware. This is a sign of trouble.
Pay special attention to the sections detailing:
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business experience of the company and its directors
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any lawsuits against the company, and suits alleging fraud
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fees to be paid and the conditions under which any fees or deposits will be returned
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the total number of business opportunities, the names and addresses of any in your area, and
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the number terminated or not renewed during the previous year
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the company's balance sheet for the most recent fiscal year and an income statement
- substantiation for any claims about your potential earnings or the earnings of existing investors.
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Other Steps
Check out the company offering the business opportunity with the Department of Financial Institutions Securities Division @ 360-902-8760. Most Business Opportunities have to be registered with the Securities Division.
Check with the Attorney General and the Better Business Bureau. But be aware that the absence of complaints doesn't necessarily mean the company is legitimate.
Call the Secretary of State where the company is headquartered to determine how long the company has been in business.
Call other investors both in your area and in other locations to determine their satisfaction and earnings. Call the people listed in the disclosure document not just people given to you by the promoter. Beware of what are known as "singers". These are people who are either paid or will receive some form of compensation for praising the product.
Visit existing locations to determine the quality of merchandise and the traffic. If the seller will not give you that information, for whatever reason, beware.
Document all conversations, promises, and commitments made by the seller. Keep a diary and keep all written materials.
Consult your attorney and/or accountant. Its money well spent to protect your assets.
Protect your money. Use an escrow account to hold your money until you receive your products and are pleased with them.
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