BBB Business Scam Alert: Misleading letter tricks new business owners into paying for unnecessary document
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Correctly filing the official paperwork can be a nerve-wracking part of setting up a new business. New business owners can easily confuse official-looking correspondence with a real legal requirement. Here’s how to spot a con that tricks new business owners into overpaying for an unnecessary Certificate of Existence.
How the scam works
You are starting a new business and register it as an LLC. Afterward, you receive a letter or email from what appears to be a government agency. The correspondence doesn’t explicitly say it’s from the government, but the wording mimics other letters you received from official sources. The message informs you that you have “one step left” before you can obtain your “certificate of existence.” It’s easy. Send the organization a fee ranging from $80 to $120, and they will mail you the document.
Don’t fall for it! The letter may state in fine print that the certificate is “optional,” but overall, the tone suggests it’s a legal requirement. It’s not. Businesses may wish to obtain a Certificate of Existence in certain circumstances, such as a loan closing. However, it’s not a required part of setting up a new company, as the correspondence implies. If you do need a Certificate of Existence, visit your state’s website and purchase one directly. States charge about $10 for this service.
One new business owner made this BBB Scam Tracker report: “I received a letter in the mail from a fake company [that has been] scamming new business LLC registrations since at least 2019. The envelope I received does not explicitly say that it is a non-government agency, and they request a payment of $112.50 to be sent within two weeks. They are quick too. They mailed me this the day after I registered [my new business]. If you read carefully, it says you have one step left in order to buy your optional certificate of existence form from Connecticut Certificate Service.”
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.
For more information
Read about a similar labor law poster scam. Learn more about choosing the right structure for your new business and understanding tax requirements. Protect your business and improve your skills as a business owner by reviewing the latest content at the BBB Business Headquarters.
If you spot a scam, report it to BBB Scam Tracker. Your report can help others avoid falling victim to similar scams.
Do you want more information about how to avoid getting scammed? Check out the Spot a Scam page and sign up to receive weekly scam alerts.
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Additional Resources
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