Watch Out for Business Scams

There are a lot of advantages to organizing your business as a Corporation or LLC: limiting your personal liability, having a clear business structure when adding owners, and allowing your business to continue after you are gone, just to name a few.  But it is true that (like most things in business) these benefits come with a fair amount of paperwork.

Unfortunately, that is where scammers will try to take advantage.

The scams I’ve seen typically come as an official-looking form, notifying you that you are required to take some action on behalf of your business.  Often, these are meant to look like they are coming from an official state agency, and only careful reading will reveal the fact that it is a private business.

The California Secretary of State maintains a list of alerts on their website (http://www.ss.ca.gov/business-programs/customer-alerts/) of recent scams that they are aware of.  As of the date of this writing, they include a misleading “certificate of status” solicitation (asking $50.00 for a worthless piece of paper); a scam falsely claiming that people are entitled to victim compensation (trying to gather personal information); trying to collect fees to terminate a business ($495.00; the Secretary of State has no filing fee for this); and solicitations to “assist” with Statement of Information filings (see below).

It’s easy to get caught by one of these scams.  Very often, as with the Statement of Information scam above, the scammer will reference a real, legal requirement–and just leave out the fact that you can do it yourself for a fraction of the price.

If you have a California Corporation or LLC, once you are past the formation phase, there are basically two things you need to file on a regular basis.  You need to be sure to pay your $800 minimum annual franchise tax to the FTB, and you need to file a Statement of Information form with the Secretary of State, either annually (Corporations) or biannually (LLCs).

Currently, the Secretary of State sends only a small postcard reminding you of your Statement of Information deadline (or, sometimes, that it’s already late).  The form itself can be downloaded from the Secretary of State’s website, and can usually be filled out in just a couple of minutes.  The filing fee is either $20 or $25.

For Corporations, you also need to keep annual minutes.  These are not filed with any government agency, just kept with your corporate records.  We assist our corporate clients with this necessary recordkeeping, but there is no government agency involved.

If you receive a solicitation in the mail, take a moment to examine it; it may be a scam.  If you think you’ve received a scam, or have already sent someone money, you can report them to the California Attorney General’s office, Public Inquiry Unit, P.O. Box 944255, Sacramento, California 94244–2550.  A complaint form is available on their website (www.oag.ca.gov/consumers).