Article orginated by: Laura Solis, Attorney, Federal Trade Commission
Certificates of Existence, Status, or Good Standing – sounds like an existential crisis, right? Instead of a philosophical commentary on the meaning of life, the certificates in question refer to business documentation from your state or local government. In a new twist on an old scam, some not-so-honest outfits may try to confuse you into thinking they’re from the government and that you need to pay for certain documents to operate your business.
When you started your business, you filed paperwork to register it with the government agency that oversees commercial activity. Here’s where the scammers come in. After registration, you might get a mailer that looks like an official invoice from a government agency, claiming that you need to pay for a “Certificate of Existence” or a “Certificate of Good Standing.” The name of the sham agency, necessary documentation, and the amount of the fees can differ from state to state. To convince you it’s legit, these mailings often use what looks like an official government seal and may include your actual business identification number. To get your money, they urge you to hurry up and pay, or they claim you could be in legal trouble.
But here’s the thing: the outfit that sent the mailer is not from the government and you probably don’t need the paperwork they’re talking about, at least not to complete your registration. If at some point you do need a Certificate of Good Standing, for example, you can get it yourself from the state easily and for a much smaller fee. If you pay the people who sent the mailer, you’ll be overcharged, at best. At worst, they could be scammers who steal your money or account information.
What can you do to steer clear of these schemes?
Talk it out. Explain to your staff how this scam works. Encourage them to talk to each other about it – an alert from one employee about a scam can help prevent others from being deceived. Order free copies of Scams and Your Small Business for your staff. It clues you into typical tactics of B2B cons.
Check all invoices closely. Scammers know that because the document seems critical to your business, you’re likely to pay first and ask questions later, or maybe not at all. If you get one of these mailers, consider contacting the state agency you registered with. You also may need to check with your staff or legal team responsible for filings with the state.
Make sure procedures are clear for approving expenditures. To reduce the risk of a costly mistake, limit the number of people who are authorized to place orders and pay invoices. Be sure that major spending can’t be triggered by an unexpected call, email, or invoice.
Spread the word. Are you part of a business networking group or service organization? Help out your fellow business people and fill them in on these schemes.
Stay a step ahead. You and your staff are likely already vigilant against scammers, including the con artists who send you phony invoices for never-ordered office supplies or listings in bogus business directories. But scammers follow the headlines and the come-ons are always evolving. The FTC’s site, ftc.gov/smallbusiness, features resources to help protect your company.