Want to be your own boss? A franchise or business opportunity may sound appealing, especially if you have limited resources or business experience. However, you could lose a significant amount of money if you don't investigate a business carefully before you buy. The Federal Trade Commission's Franchise and Business Opportunity Rule requires franchise and business opportunity sellers to give you specific information to help you make an informed decision.
The Federal Trade Commission (FTC) has a variety of information on franchises on its website. Among the helpful information is a listing of short guides on different types of franchises as well as cautionary information www.ftc.gov/bcp/menus/consumer/invest/business.shtm.
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What a pitch! You may have received a letter or seen an infomercial promoting a seminar or conference that promises to help you make a lot of money. Seminar hucksters say they'll give you valuable information about how to invest successfully or operate a profitable business. Their "success stories" and testimonials seem to show that anyone who attends the seminar can make money from the investment and business program they're selling. Some promoters may even claim to have gotten rich from their own investment in the program.
If you attend one of these seminars, you'll hear a series of sales pitches for a variety of business opportunities and investments. Consumers who invest in these "opportunities" frequently find that the pay-off isn't as promised—and they can't recoup the money they spent.
The Federal Trade Commission wants to alert you to the secrets of the seminar squeeze. Be wary of promotional materials or sales pitches that make these claims:
Promises of quick, easy money can be a powerful lure. If you buy into a business opportunity at a seminar, you may find that the products and information you purchased are worthless and that your money is gone.
If you've been victimized by a seminar promoter, contact your local consumer protection agency, state Attorney General, and Better Business Bureau.
"Be part of one of America's Fastest Growing Industries! Earn thousand of dollars a month—from your home—Processing Medical Billing Claims."
You can find ads like this everywhere—from the streetlight and telephone pole on your corner to your newspaper and PC. While you may find these ads appealing, especially if you can't work outside your home, proceed with caution. Not all work-at-home opportunities deliver on their promises.
Many ads omit the fact that you may have to work many hours without pay. Or they don't disclose all the costs you will have to pay. Countless work-at-home schemes require you to spend your own money to place newspaper ads; make photocopies; or buy the envelopes, paper, stamps, and other supplies or equipment you need to do the job. The companies sponsoring the ads also may demand that you pay for instructions or "tutorial" software. Consumers deceived by these ads have lost thousands of dollars, in addition to their time and energy.
Several types of offers are classic work-at-home schemes.
Medical billing. Ads for pre-packaged businesses—known as billing centers—are in newspapers, on television and on the Internet. If you respond, you'll get a sales pitch that may sound something like this: There's "a crisis" in the health care system, due partly to the overwhelming task of processing paper claims. The solution is electronic claim processing. Because only a small percentage of claims are transmitted electronically, the market for billing centers is wide open.
The promoter also may tell you that many doctors who process claims electronically want to "outsource" or contract out their billing services to save money. Promoters will promise that you can earn a substantial income working full or part time, providing services like billing, accounts receivable, electronic insurance claim processing and practice management to doctors and dentists. They also may assure you that no experience is required, that they will provide clients eager to buy your services or that their qualified salespeople will find clients for you.
The reality: you will have to sell. These promoters rarely provide experienced sales staff or contacts within the medical community.
The promoter will follow up by sending you materials that typically include a brochure, application, sample diskettes, a contract (licensing agreement), disclosure document, and in some cases, testimonial letters, videocassettes and reference lists. For your investment of $2,000 to $8,000, a promoter will promise software, training and technical support. And the company will encourage you to call its references. Make sure you get many names from which to choose. If only one or two names are given, they may be "shills"—people hired to give favorable testimonials. It's best to interview people in person, preferably where the business operates, to reduce your risk of being mislead by shills and also to get a better sense of how the business works.
Few consumers who purchase a medical billing business opportunity are able to find clients, start a business and generate revenues—let alone recover their investment and earn a substantial income. Competition in the medical billing market is fierce and revolves around a number of large and well-established firms.
Envelope stuffing. Promoters usually advertise that, for a "small" fee, they will tell you how to earn money-stuffing envelopes at home. Later—when it's too late—you find out that the promoter never had any employment to offer. Instead, for your fee, you're likely to get a letter telling you to place the same "envelope-stuffing" ad in newspapers or magazines, or to send the ad to friends and relatives. The only way you'll earn money is if people respond to your work-at-home ad.
Assembly or craftwork. These programs often require you to invest hundreds of dollars in equipment or supplies. Or they require you to spend many hours producing goods for a company that has promised to buy them. For example, you might have to buy a sewing or sign-making machine from the company, or materials to make items like aprons, baby shoes or plastic signs. However, after you've purchased the supplies or equipment and performed the work, fraudulent operators don't pay you. In fact, many consumers have had companies refuse to pay for their work because it didn't meet "quality standards."
Unfortunately, no work is ever "up to standard," leaving workers with relatively expensive equipment and supplies—and no income. To sell their goods, these workers must find their own customers.
Legitimate work-at-home program sponsors should tell you—in writing—what's involved in the program they are selling. Here are some questions you might ask a promoter:
The answers to these questions may help you determine whether a work-at-home program is appropriate for your circumstances, and whether it is legitimate.
You also might want to check out the company with your local consumer protection agency, state Attorney General and the Better Business Bureau, not only where the company is located, but also where you live. These organizations can tell you whether they have received complaints about the work-at-home program that interests you. But be wary: the absence of complaints doesn't necessarily mean the company is legitimate. Unscrupulous companies may settle complaints, change their names or move to avoid detection.
If you have spent money and time on a work-at-home program and now believe the program may not be legitimate, contact the company and ask for a refund. Let company representatives know that you plan to notify officials about your experience. If you can't resolve the dispute with the company, file a complaint with these organizations:
A franchise or business opportunity seller must give you a detailed disclosure document at least 10 business days before you pay any money or legally commit yourself to a purchase. You can use these disclosures to compare a particular business with others you may be considering or simply for information. The disclosure document includes:
The Franchise and Business Opportunities Rule will provide you with complete information on rules and regulations affecting franchises: http://www.ftc.gov/bcp/franchise/netfran.shtm
Before you buy a business:
The FTC website has practical information about some common business opportunity scams; how to spot, stop and avoid them; and how to file a complaint if you think you've experienced a fraud. www.ftc.gov/bcp/edu/microsites/bizopps/businfo.html
The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint free information on consumer issues, visit www.ftc.gov or call toll-free, (877) 382-4357; TTY: (866) 653-4261. The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
The Missouri Attorney General's Office offers information on their website at: ago.missouri.gov/divisions/consumerprotection.htm. You can also contact the Attorney General's Consumer Protection Hotline at (800) 392-8222.
Contact your local (county, city, township) government offices for specifics regarding local licensing and regulations.
Anyone conducting business in the State of Missouri under a name other than their own legal name (e.g., John Doe), must register the business name with the Missouri Secretary of State. Missouri law allows businesses to operate under four forms or organization:
Each structure has its own advantages and disadvantages and there are many modifications and variations within these forms. The key to selection revolves around the concept of liability and taxation. You must decide which of these structures best suits your business. In choosing your business structure, consult with a qualified accountant and/or attorney who are familiar with your resources and objectives.
The Licenses and Registration Checklist is a guide to help you with the licensing and registration requirements for starting your new business.
You can download forms on the web at: www.sos.mo.gov/business/corporations/forms.asp
or request them from the Secretary of State's Office at (573) 751-3200.
Understanding the taxes that apply to your business and how to meet the legal requirements of those taxes is critical. Consultation with an accountant or attorney is advisable.
Tax considerations are essential during the formation of a new business and during its entire life. When a business is just starting out, it may have little or no income or assets and the choice of structure may not seriously affect its tax liability. However, as the business grows, the tax implications become more significant.
Choosing a particular structure does not necessarily determine how the business will be taxed. The table found in Starting a New Business in Missouri identifies the state and federal forms that must be filed for different business structures and compares the tax liabilities for the most common business structures.
Tax responsibility includes federal, state and local taxes. As a business owner you will be responsible for income taxes, payroll taxes, property tax and other miscellaneous taxes.
Businesses making retail sales must obtain a Missouri Retail Sales License from the Missouri Department of Revenue. A bond, based on projected monthly gross sales is posted at the time of application. An application form (Form 2643) can be obtained from the Dept. of Revenue on the web at dor.mo.gov/forms or by calling (800) 877-6881. Those businesses buying wholesale or operating solely as a wholesaler should complete a Form 149 Sales/Use Tax Exemption Certificate (see: www.dor.mo.gov/tax/business/sales/forms/149f.pdf ) and provide it to their supplier showing the sale is exempt from sales tax.
For more information on taxes and access to printable copies of the required forms visit: Doing Business in Missouri: Taxes.
Obtain a copy of Employer's Tax Guide from your local IRS office or call (800) 829-3676. "Circular E" explains federal tax withholding and Social Security tax requirements for employers as well as containing up-to-date withholding tables for you to use to determine how much federal income tax and Social Security tax is to be withheld from each employee's paycheck.
What is involved?
For more information on your responsibilities as an employer, please contact your local Missouri Career Center (formerly Job Service). To locate the nearest office, check the phone book or call 1-888-728-JOBS or visit www.missouricareersource.com.
For a complete discussion on hiring employees, your responsibilities, and access to the required forms, refer to: Doing Business in Missouri: Hiring Employees.
You may also find the following information helpful as you begin your business: