Tips from the FTC On Avoiding Business Scams
The Federal Trade Commission advises consumers to consider these points before entering into any business agreement.
- Get all earnings claims in writing. Be sure the information includes the number and percentage of recent or current clients who have earned at least as much as the promoter claims. If the promoter hesitates or refuses to give the information in writing, find another business opportunity.
- Interview references provided by the promoter of the business opportunity. The FTC requires business opportunity promoters to give potential purchasers the names, addresses and phone numbers of at least 10 prior purchasers who live the closest to the potential purchaser.
- Study the business opportunity’s franchise disclosure document. Under the FTC Franchise Rule, most business opportunity promoters are required to provide this document to potential purchasers. It includes information about the company, including whether it has faced any lawsuits from prior purchasers or lawsuits alleging fraud.
- Contact the attorney general’s office, state or county consumer protection agency and Better Business Bureau in the area in which the business opportunity promoter is based and where you live.
- If the business opportunity involves selling products from well-known companies, call their legal departments to determine whether the opportunity and its promoter are affiliated with the businesses.
- Consult an attorney, accountant or other business adviser before you put any money down or sign any papers. Entering into a business opportunity can be costly, so it’s best to have an expert check out the contract first.
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