Don’t get scammed! Avoid These Three Common Rackets

Solicitations to scam people out of money are not new.  However, some shady operators specifically target small businesses. Avoid headaches by steering clear of these three common scams. 

Launching or maintaining a small business brings government paperwork. Scammers know it’s difficult to stay on top of all of the details. In fact, they rely on business owners’ desire for shortcuts and fear of missing important requirements. We reveal three small business scams that prey on these feelings to trick you into buying unnecessary services.

Corporate Filings Scams

You have just filed a limited liability company or corporation with your state’s Secretary of State office. Congratulations! At this point, you may receive a notice from the state confirming your filing. However, you may also get mail from third-party companies who claim that they will obtain your Certificate of Good Standing (sometimes called a Certificate of Status) from the state for a nominal fee. Is this a legitimate service? Do you even need a Certificate of Good Standing? 

Most of these third-party companies are a scam, and their solicitations are not related to any state government. They scan the public record for newly filed entities and mail out misleading solicitations. 

Why is this a scam? You can obtain a copy of your Certificate of Good Standing from the state’s Secretary of State office on your own. You do not need to pay a third party for that service. In fact, some states provide a Certificate of Good Standing for free to recently formed entities. Other states may charge a nominal fee. Either way, these third-party companies will add on an additional fee to compensate themselves for their unnecessary services.  

Furthermore, you may not need a Certificate of Good Standing or Certificate of Status at all. Many businesses choose to obtain such a certificate for specific reasons. However, it is not a requirement as part of the limited liability company or corporation formation process. 

It can be hard to spot the scam, because the solicitations may look very, very official. You may even mistake it for a letter from your state’s Secretary of State office. Frequently, these solicitations mention (in the fine print) that they are not official state documents and that you are not obligated to order a Certificate of Good Standing. 

In Illinois, the Secretary of State has identified a non-governmental firm presenting itself as “IL Certificate Service” as a company implementing this type of scam. View the alert to learn more.

Intellectual Property Scams

Similar solicitations often arrive after you file a trademark application with the United States Patent and Trademark Office (USPTO). In this scam, a private company will ask you to pay additional money for your trademark application. Similar to the Corporate Filings Scam discussed above, these companies find your address as part of the public record, as it is listed on the trademark application with the USPTO. These solicitations often look very official and thus may lead you to believe that you missed a step in filing your trademark application with the USPTO. However, most of these solicitations are misleading.

Why is this a scam? Well, if you have fully completed your trademark application with the USPTO, you have already paid all the fees required for the process. While some of the companies that send solicitations may offer legitimate services, they may mislead you into thinking that you must pay more fees and that you are paying these fees to the USPTO. In reality, you have likely already paid all the required fees. These third-party companies have no affiliation with the USPTO, nor are their services necessary.  

Official communications from the USPTO will clearly state that they are from the United States Patent and Trademark Office. If you have concerns about the status of your Trademark Application, you should check with the USPTO. 

Small Business Loan Scam Related to COVID-19

The Coronavirus Aid, Relief, and Economic Security (CARES) Act includes an infusion of money into the Small Business Administration and the Paycheck Protection Program (PPP). However, there are already scams surrounding these programs. If you have applied or are planning to apply through the PPP or Economic Injury Disaster Loans (EIDL) programs, be mindful of scammers trying to obtain your personal and financial information.

The United States Treasury Department and the SBA will not call you to ask for personal or financial information. Do not provide any sensitive information, including bank account information, your Social Security number, or credit card information. This information may allow someone to apply for a loan on your behalf, and you will be stuck paying the loan back.

Some scammers are mailing solicitations to small businesses claiming that their company can get you approved for the loan faster if you pay them a fee. Other scammers are charging a fee in exchange for supposed information on how to apply for the loans successfully. Do not pay any money to apply for or obtain information about these small business loan programs. All of the information, as well as the application process, is available online for free. 

As a final word of caution: do not work with unknown lenders for these loans. Many new lenders are popping up as a result of the CARES Act. And while some may be legitimate, it is much safer to work with a federally backed credit union or a Small Business Administration approved lender. These lenders tend to be more familiar with these loan programs and are usually better equipped to handle the administrative issues related to these small business loans. If there is a reputable bank with which you already have a relationship, you should work with that bank, as they know your financial history and needs. 

The Keys: Awareness and Attention

We hope that you found this information about common business-specific scams informative and helpful. Carefully reading through any solicitation you receive, or carefully analyze any phone call you may receive, will go a long way toward determining the legitimacy of the offer.

The COVID-19 pandemic is a dynamic and evolving public health emergency. The laws and situation are fluid, and this article may not reflect the most current situation.

This blog is made for educational purposes and is not intended to be specific legal advice to any particular person. It does not create an attorney-client relationship between our firm and the reader and should not be used as a substitute for competent legal advice from a licensed attorney in your jurisdiction.

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