Internet Business Opportunity Advice
The FTC offers this advice to consumers considering an Internet-related business opportunity:
* Consider the promotion carefully. If it claims buyers can earn a certain income, then it also must give the number and percentage of previous purchasers who achieved the earnings. If an earnings claim is there - but the additional information isn't - the business opportunity seller is probably violating the law.
* Get earnings claims in writing. If the business opportunity costs $500 or more, then the promoter must back up the earnings claim in a written document. It should include the earnings claim, as well as the number and percentage of recent clients who have earned at least as much as the promoter suggested. If it's a work-at-home or other business opportunity that involves an investment of under $500, ask the promoter to put the earnings information in writing.
* Study the business opportunity's franchise disclosure document. Under the FTC Franchise Rule, many business opportunity promoters are required to provide this document to potential purchasers. It includes information about the company, including whether it has faced any lawsuits from purchasers or lawsuits alleging fraud. Look for a statement about previous purchasers. If the document says there have been no previous purchases but the seller offers you a list of references, be careful: the references probably are phonies.
* Interview each previous purchaser in person, preferably where their business operates. The FTC requires most business opportunity promoters to give potential purchasers the names, addresses and phone numbers of at least 10 previous purchasers who live the closest to the potential purchaser. Interviewing them helps reduce the risk of being misled by phony references.
* Contact the attorney general's office, state or county consumer protection agency and the BBB both where the business opportunity promoter is based and where you live to find out whether there is any record of unresolved complaints. While a complaint record may indicate questionable business practices, a lack of complaints doesn't necessarily mean that the promoter and the business opportunity don't have problems. Unscrupulous dealers often change names and locations to hide a history of complaints.
* If the business opportunity involves selling products from well-known companies, call the legal department of the company whose merchandise would be promoted. Find out whether the business opportunity and its promoter are affiliated with the company. Ask whether the company has ever threatened trademark action against the business opportunity promoter.
* Consult an attorney, accountant or other business advisor before you put any money down or sign any papers. Entering into a business opportunity can be costly, so it's best to have an expert check out the contract first. If the promoter requires a deposit, ask your attorney to establish an escrow account where the deposit can be maintained by a third party until you make the deal.
* Take your time. Promoters of fraudulent business opportunities are likely to use high-pressure sales tactics to get you to buy in. If the business opportunity is legitimate, it'll still be around when you're ready to decide.
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