If It Sounds Too Good, It May be a Fraudulent Business

For many people, starting a business is a dream they want to make a reality.  It’s not a choice for everyone, as it does come with considerable risks; but if you’re willing to stick with it, it could pay off handsomely in the long run.

Choosing the right business though can lead to a lot of questions.  Do you choose to startup your own business or get in on a franchise?  If you choose a franchise, how do you know it will be profitable?  More to the point, how do you know that the business opportunity you have decided to go with isn’t fraudulent or a scam?

Even though most of your questions regarding business and franchise law can be directed toward an experienced lawyer, there are some things that people can consider on their own that will help them determine if a business opportunity is a fraudulent one or not. Let’s take a look.

Is there an offer of a quick and easy start up? As many of our readers will tell you, start-up businesses and franchises are rarely “easy” to start up because a business owner must make sure that they are in compliance with all state and federal laws before beginning operations. That’s why any advertisement that offers “quick and easy start up” may be a scam that could lead to litigation if you’re not careful.

Does the start up offer huge profits? According to the Federal Trade Commission, advertisements that make claims about how much an individual will make running a business must support these claims with evidence such as earnings reports from previous purchasers. The same is true for franchises where a disclosure document is required.

Is there a no risk promise? It’s important to point out that no business venture comes without risk nor is there ever a guarantee that a business will be successful and won’t fail. This is why claims of no risk may suggest a fraudulent business or even a scam and should be avoided.

As the old saying goes: if something looks and sounds too good to be true, it probably is. When applied to start-up businesses, this can mean running the risk of associating yourself with a fraudulent business, which is not a mistake any of our readers want to make. Obtaining a lawyer though can help you avoid this mistake.

Sources: The Federal Trade Commission, “Business Opportunity Scams,” Accessed Nov. 3, 2014

The Federal Trade Commission, “Ads for Business Opportunities: How To Detect Deception,” Accessed Nov. 3, 2014