LegalZoom Blog

Legal news and small business tips.

Small Business Scams

with one comment


Shutterstock/cristovao

Shutterstock/cristovao


Small businesses are susceptible to scams because scammers assume that owners don’t know any better. Entrepreneurs just starting out may, in fact, not be aware of the scams that are frequently targeted at small businesses.
 
To protect yourself and your business, here are some of the top scams that you should look out for and avoid whether you’re a new or seasoned small business owner.

The Sham Award

According to Open Forum, one of the biggest scams that occurs to small businesses involves a fake award. The scammer will reach out to a small business and express that they’ve won an award for their work. The catch is that the scammer will ask for a partial or full payment for the award and then charge a credit card yearly “membership fees.”

If someone calls your business and requests payment for any type of award, beware. Google the name of the organization and you’ll most likely find complaints from other small business owners.

The “Yellow Pages”

Scammers will call up small businesses and ask for someone to confirm the business’ address, phone number, e-mail, website and other contact information. They will say they are from an online directory like The Yellow Pages, and then some time later, a bill will come in the mail for the listing. Though the owner never agreed to the charges, the scammer cuts together the audio to make it sound as if there was confirmation.

If someone calls your business and asks you to confirm any type of information, don’t. Hang up on them immediately and report the scam to the BBB with the phone number that the scammers called from.

Fake Overpayment

When scammers pretend to purchase products from small businesses, they will send a bogus check for more money than required. That way, they will receive a check for the difference and get to keep this money and the products.

Never accept a bigger check than necessary from a client—return it right away and then ask for a new check for the right amount of money. If a client is rushing you to cash it, it’s probably going to bounce.

False Investors

Scammers will say they are representatives from a financial institution and offer to invest in small businesses. The first step, though, is for a small business to “qualify.” This takes a substantial amount of paperwork as well as fees and in the end, there are no investments made.

Stick to your own investors and banks. No one is going to come to you and make you pay for applications if they’re really interested in investing in your business.

Digital Money

Bitcoins and other digital currency websites are under scrutiny from The North American Securities Administrators Association because they are feeding grounds for scam artists. They are threats to investors and can prove to be detrimental to a business’ funding.

Stick to investors who have real sources for funds and not Bitcoins or other digital currencies. You never know who is lurking and looking to take advantage of you on those websites.

 

 

 

ShareFacebookTwitterGoogle+LinkedInEmail

Sign up for the LegalZoom newsletter!

Written by

December 9th, 2013 at 1:59 pm