How To Check a Company's Legitimacy

The number of businesses that open each year is staggering. Some are legitimate businesses while others are fly-by-night operations whose only aim is to rob people of their money and other possessions. If you plan to do business with a certain company as an investor or customer, it may be prudent to check the company’s legitimacy. This is especially important if there will be financial transactions between you and the company.

There are a few things you can do in order to find out if a company is legitimate or not. Here are some suggestions.

  • Obtain information about the company. You need to know the exact company name, the address (headquarters if they have many branches), and other contact information (phone numbers, websites, etc).
  • Go to your local Securities and Exchange Commission (SEC) office. Publicly held companies are registered with the SEC. You can verify from this office if the company has or has had lawsuits filed against the company or if it has been involved in questionable practices. The SEC holds documents that contain background information regarding the board of directions and other officers of the company.
  • Visit the local office of your Secretary of State. Companies that are not publicly traded should have incorporation documents with this office. Review these documents well and take note of who are the people involved with the company.
  • Contact the Better Business Bureau or BBB. The BBB has local offices around the country. You can pay them a visit and check if the company is accredited with the BBB. They also have information on companies that are not accredited by the agency. To make things easier, you can find the BBB on the web. As soon as you find the company in the BBB site, you can see information such as BBB Rating, Company Profile, Complaint Experience, Complaint Closing Statistics, Licensing, Government Actions and many more. The BBB rating can tell you if a company’s reliability is doubtful or not.
  • Inquire with the Chamber of Commerce (CC). Find out if the company is a member of the CC where it is located. You can get valuable information regarding the company from them.
  • Consult the local office of the attorney general in your state. Ask if there were any complaints filed against the company. The fraud division or the consumer-protection office would have this information.
  • Find out if the company has filed for bankruptcy. The Bankruptcy Court where the company has its office address should be able to tell you whether the company is in their database.
  • Do an online search of the company. You’d be surprised what you find when you search for the company on the web. Check if there are any negative write-ups, blogs, comments and other information about the company. Make sure to include in your search not only the company name but the company’s directors and officers as well. Don’t forget to check newspaper archives for useful information.
  • Visit the company. If the company’s address is in your location, verify this address by driving to the company’s office. This way you can see for yourself if the company exists.

Protect yourself from doing business with an illegitimate company. There is more than one way to find out if a company is on the up-and-up. Scams are starting to become a way of life. The best way to avoid getting involved with an illegitimate business is to do a little sleuthing both on and off the web.


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