Business Registration Scams to Avoid

If you’re planning to start a new business, get ready to deal with a variety of different registrations -- everything from the official entity filing with your state to registering a domain name for your website.

Each of the various registration processes is fairly straightforward, as are the fees involved with them. Unfortunately, however, unscrupulous scam artists have concocted a number of different schemes designed to trick new (and sometimes even veteran) entrepreneurs into paying bogus fees and other expenses associated with registering their businesses. Here is a look at a few of the most common schemes and how you can avoid becoming a victim.

• Registration filing fees: Every new business owner is required to register their company with the state government as a sole proprietorship, partnership, corporation, LLC, or nonprofit entity. Each state has different requirements with regard to which specific forms, documents, and schedules need to be filed and what fees need to be paid at this time.However, no state requires that business owners file documents or pay registration fees via a third party. Unfortunately, scam artists have duped many unsuspecting business owners into paying additional fees that go straight into the thieves’ pockets. Be on the lookout for official-looking correspondence, perhaps even with a fake seal, stating that you must pay fees to a third-party entity other than your state government -- this is most likely a fraud.

  Also, look carefully at the reference number in the correspondence to see if it matches your state-assigned number, as well as statutes cited that may not apply to your business. If you’re still unsure, contact your Secretary of State’s office.

• Business name filing fees: Depending on your state, you may be required to register your business name in addition to your legal entity filing (as described above). Scams similar to the entity registration scheme have arisen in which perpetrators mail official-looking “name renewal” forms to new and existing business owners stating that fees must be paid to them in order to renew their business’s legal name.If required, any name renewal can be done directly with your state government and requires no payment to any third party.
• Domain name registration and renewal: Here, fraudsters send business owners invoices or e-mails requesting either a onetime or recurring fee to register or renew their company’s website address. If you’re not paying careful attention, it’s easy to just pay the fee without realizing that the invoice or e-mail did not come from the company you originally established your domain name with.Therefore, be sure to save all the initial correspondence with your domain name host, including your domain’s actual expiration date, and compare this with the invoice or e-mail you receive. Also make sure the domain name cited matches your name exactly, including .com versus .net, .biz, .org, .info, and so on.
• Work permit, license, and inspection fees: Depending on your industry, you may be required to obtain various permits and licenses or submit to inspections to operate your business. Some frauds have begun appearing in which thieves try to take advantage of these requirements.In one scheme, for example, a supposed multinational company abroad promises U.S. businesses lucrative contracts if they are willing to pay for work permits and visas. In another, fraudsters pose as health officials and try to schedule health inspections in which they bribe owners in exchange for passing grades. Note that legitimate health inspectors rarely schedule inspections ahead of time. Also, they will always carry appropriate identification issued by your state or county government health agency, so ask to see it if you’re in doubt.

Don Sadler is a freelance writer specializing in business and finance. Reach him at don@donsadlerwriter.com.