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business certificate scam
© Andrey Popov |
Security & privacy

Watch out for fake business letters that trick owners into overpaying

At the start of this year, 33.2 million small businesses were operating in the U.S. Estimates say they make up about 99% of all companies in the country. That is a considerable percentage of owners who need to navigate the challenges of running a company. Tap or click here for free resources to grow your business.

Starting a business is tough, and many pitfalls can cost owners dearly, especially first-time entrepreneurs. Heaps of paperwork can be confusing, and some documents might seem unnecessary. Now you have to watch for scammers looking to rip you off.

Read on for details on this sneaky scheme to trick business owners into paying an unnecessary fee.

Here’s the backstory

Registering a new business takes a lot of planning and filling in numerous forms while ensuring they are correct. If you mess up a submission or omit certain information, it can delay registration.

One of these is a Certificate of Existence issued by the state. Also called a Certificate of Good Standing, it records the information of the business entity, such as the owner’s details and the registration number.

After you’ve set up your business as a Limited Liability Company (LLC), you can easily obtain a Certificate of Existence. But here’s the problem.

According to the Better Business Bureau, scammers send out emails or letters informing owners that they have one step left before they can obtain their certificate of existence and that it’s easy.

You must send them a fee between $80 to $120, and they’ll issue the document. Here’s where the scam comes into play. The letter isn’t from a state agency at all. It’s created by thieves looking to rip you off.

In fact, many states don’t require a Certificate of Existence. If you want one, you can purchase it from your state for about $10. Sending the fee from an unofficial document won’t get you the Certificate of Existence. You’ll just be throwing your money away.

Avoid scams targeting business owners

The BBB explains that you might want to get a Certificate of Existence for circumstances like applying for a loan. But it’s typically not required for setting up a new company, as the correspondence implies.

The message uses wording to make it seem like an official letter from a state agency and charges up to ten times more than it actually costs. To get a legitimate certificate, visit your state’s website and purchase one directly. BBB gave more tips on how to avoid these types of scams.

How to avoid scams targeting new business owners:

  • Get familiar with the state laws that apply to your business. Check your state’s government website to find out what business certificates and licenses are required by law, if any.
  • Know that new business owners are targets for scams. Stay alert to the possibility of being targeted by a scammer. Don’t take everyone at their word and be wary of unsolicited communications. Do research before paying for any services or certificates that anyone claims you need in order to do business.
  • Review payment notices carefully. Scammers sometimes send fake invoices hoping you’ll assume they are legitimate and pay without thinking. Never pay without confirming an invoice is real.
  • Don’t panic. Scammers like to use scare tactics to make people pay them money. Don’t make a payment just because someone threatens you or your business. Always make sure the request for payment comes from an official source before you pay.

If you spot a scam like this, report it to the BBB Scam Tracker. You can help others avoid falling victim to similar scams.

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