The One Thing You Need to Know about Florida Law, Even if You Don't Live There.
With a graphic of individuals running barefoot over coals, Hillsborough County (Florida) Government's, advice about due diligence for purchasing franchises or business opportunities, stops the reader. At least for a novel graphic.
But is the advice about buying a business opportunity worth the stop? Does it matter if you are not a resident of Florida?
Yes, and no.
There are several articles about due diligence for business opportunities, but the best article on due diligence for business opportunities is here. (Strangely, it is called "CREDIT REPAIR: SELF-HELP MAY BE BEST!)
The article first lays out what a business opportunity is and what rights you as a purchaser have.
A business opportunity is an offer to assist a person in starting his or her own business by providing - either through sales or lease - products, equipment, supplies or service needed to carry on the business.
Business opportunities range from addressing envelopes or assembling toys at home at a cost of a few dollars, to establishing vending machine routes or installing pay telephones for thousands of dollars. Many times, these promoters imply that investors can see a substantial return with minimal effort.
This brochure is intended for those individuals considering a purchase of a business opportunity with an initial investment of more than $500. If you are considering a work-at-home opportunity requiring a more modest investment, such as stuffing envelopes, assembling products or making crafts, contact the Florida Department of Agriculture and Consumer Services at 1-800- HELP-FLA (435-7352) before investing your money, or request a copy of the free brochure, "Home Employment Opportunities."
Florida Law Requires Disclosure
The Florida Sale of Business Opportunities Act is intended to help protect prospective investors by requiring the seller to provide information about the business opportunity. It requires sellers of businesses to provide a disclosure document that includes the information necessary for the prospective investor to make an informed investment decision. This disclosure document must be presented prior to the time an investor signs a business opportunity contract or makes any payment.
The law is administered by the Florida Department of Agriculture and Consumer Services, which is the state's lead agency for consumer issues. The Department operates the state's consumer hotline, 1-800-HELP-FLA (435-7352). As stated in the Florida Statutes, the State of Florida does not review and does not recommend, approve, endorse or sponsor any business opportunity, and the information contained in the disclosure is not verified by the state.
Quick take away: Investing in business opportunity that sells in Florida, you are spending more than $500, then check with Florida Department of Agriculture and Consumer Services that the business opportunity is first registered and then obtain the disclosure document. It doesn't matter that you are not in Florida, or the corporation is not Florida - if they are selling opportunities in Florida, they have to be registered. If they cannot produce a disclosure document, they are very likely a fraud. But don't ask the promoter, ask Florida Department of Agriculture and Consumer Services at 1-800-HELP-FLA (435-7352) first.
Even if they can produce a disclosure document from Florida, which you can order from Florida Department of Agriculture and Consumer Services, you still need to review the document for accuracy. Remember, As stated in the Florida Statutes, the State of Florida does not review and does not recommend, approve, endorse or sponsor any business opportunity, and the information contained in the disclosure is not verified by the state.
What is the Florida Business Opportunity Disclosure Document?
Disclosure Document must include, in part:* The history, background and financial status of the seller, including the names of officers and general managers of the business, felony convictions, if any, and their bankruptcy history.
* The amount of money required for the investor to get started and whether the money is refundable and under what conditions.
* The financial arrangements and any additional fees that might be required.
* A statement whether the seller guarantees to buy back unsold products. If such a guarantee is offered, the seller may be required to post bond with the Department of Agriculture and Consumer Services and disclose information relative to such a bond.
* A copy of the contract defining the relationship between the seller and the investor.
* A full and detailed description of the actual services to be performed by the seller.
* A copy of the current (no older than 13 months) financial statement.
* A description of the program if training is offered by the seller, and a statement of whether the buyer is required to complete the training to the satisfaction of the seller.
* The condition under which the agreement may be canceled.
There are several important items to investigate, once you have the disclosure document. But I want to address three important items. First, the background of the sellers. Many times the sellers of fraudulent or scam business opportunities do not use their real names. Get positive identification before dealing with anyone. Also check the local corporate records to verify how long the company has been in existence, as compared to what they say.
Guarantees figure large in business opportunity frauds. Purchasers wrongly assume that a guarantee reduces the risk; generally it increases the risk dramatically unless the guarantee is funded. Check the financial statements to see what reserve has been set aside for the guarantee. No reserve and the guarantee is worthless.
Finally, always contact by mail, email and then telephone all the distributors in the disclosure package and ask them what they would have done differently. Don't contact one or two, and be prepared for bad news. Generally, business opportunity frauds are clever ideas for a business, but the operator is only interesting in selling the dream or sizzle. There will be nothing behind the sizzle.
