Whether you are looking for a new business opportunity, ways to improve business performance, or ways to simply reduce taxes, beware of these small business scams. Don't be fooled! Any investment made in these schemes will not give you a positive ...
Whether you are looking for a new business opportunity, ways to improve business performance, orÂ ways to simply reduce taxes, beware of these small business scams. Donâ€™t be fooled! Any investmentÂ made in these schemes will not give you a positive return on investment. On the contrary, you will endup losing money and may invoke closer scrutiny by the IRS and other government agencies.
Mark Kohler and Robert Moskowitz offer tips on avoiding these schemes:
1. The â€œShelf Corporation.â€ Donâ€™t invest thousands of dollars in a pre-made corporation in hopesÂ of gaining immediate corporate credit. Doing this the right way takes time. If anyone proposesÂ to help you gain instant credit through a â€œshelf corporationâ€, walk away.
2. Deal of the Century. Be cautious when a friend, neighbor, or fellow church member offers you aÂ too-good-to-be-true deal. Be especially wary if that person says that there is no need for aÂ lawyer to get involved in the process. Itâ€™s always advisable to consult a lawyer before enteringÂ into business agreement.
3. Business Coach. Just because someone hangs out a shingle and claims to be a coach does notÂ necessarily mean that they are qualified to give out business advice. Be very wary of anyoneÂ who tries to dispense legal or tax advice. Itâ€™s a good idea to ask for credentials first to verifyÂ whether or not they have the expertise you need.
4. State Filing Fees. In most states you do have to pay a small fee to file incorporation papers andÂ other legal documents. In this case, a fee must accompany the filing. You will not receive a billÂ after sending the documents. Typically, the filing will be rejected and returned, if something isÂ wrong with your paperwork or the appropriate fees were not included. If you do receive a billÂ after the fact, itâ€™s most likely a scam.
5. Business Funding Kits. No matter what the sales pitch may be, there is no reason to invest inÂ â€œhigh-pricedâ€ information on how to get grants or no-interest loans for your business. You canÂ usually research this information for yourself at little to no cost. The information contained inÂ these kits is often too general and inaccurate to be of real use.
6. Phantom Investors. Use caution if someone approaches â€œout of the blueâ€ offering to invest inÂ your company, assuming it meets their qualifications. They will require lots of documentation toÂ verify your eligibility. Often scammers will use this approach to steal your corporate identity.
7. Advance-Fee Loans. Bottom Line: Legitimate lenders do not required an upfront processing feeÂ to determine whether or not you qualify for a loan.
8. Overpayment Retainer. Never accept overpayment by a customer for your product or service.Â Itâ€™s not a retainer; itâ€™s a scam!
9. Inventory Liquidation. If someone offers to pay you a commission to help source companiesÂ with excess inventory to sell, be very cautious. Typically, the scammer promises to â€œturn overâ€Â the inventory quickly and secure a high return for you, but you have to pay a franchise fee. InÂ the end, the sale never happens and your franchise fee is not refundable.
For more tips on these and other small business scams, go to Scam-Proof Your Business and Avoid TheseÂ 5 Small Business Scams.
Click here to find out more about Shelf Corporations.
To report a scam, go to the BBB Scam Tracker.Â To find trustworthy businesses, go to bbb.org
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