How Do I Check Whether a Business Is Legitimate?

To determine the legitimacy of a business, you need basic research skills. You will want to look up current licenses, check with consumer watchdog groups and fact-check any claims. It's also helpful to know how to investigate tenant status. In essence, you need to be a mini-private investigator to bring to light whether a company is legal.

Things You'll Need

• Business licenses
• Consumer watchdog(s)
• Landlord information, optional
• Contacts of former and current clients

Instructions

1. Find out the full name of the business and any possible DBA (Doing Business As) name. Confirm the business address and company officers' names to successfully match the business license information using an online database for the state where the business is incorporated. Tax ID and articles of incorporation are public information, so these should be found. Otherwise, it is a red flag and should be probed further.

2. Contact watchdog groups that monitor the behavior of businesses, such as the Better Business Bureau and Angie's List. Electricians, for example, may be reviewed and rated on sites like Angie's List.

3. Contact clients that may be mentioned in references or testimonials. Reach out and inquire about their experiences. Look for positive adjectives that describe the work being completed in a timely fashion. Be sure to ask: Would you hire them again? If not, why not? Select a minimum of three clients randomly to avoid bias as much as possible.

4. Find out about lease agreements. The landlord may have eviction proceedings against the business, which could be another red flag. Office sharing is another suspicious sign, because the business name may not be displayed anywhere. Therefore, the business could easily disappear without notice. There should be some type of permanent signage and business advertising. Further, the business should be in good standing with the landlord. Make a phone call, and ask how long the business has been a tenant; less than a year is not a good sign, unless the business recently expanded.

5. Call the main office to determine legitimacy. The voice mail or secretary should not mention another business name, unless it is legally tied. For example, a DBA name is acceptable.

6. Determine how much Internet presence is used by the business. If company has a website with plenty of contact information and details, that is a good sign. Another positive is if the business responds to emails, ideally within 24 to 48 hours. Look for overall consistency, current legal status and clients that are willing to praise the product.

Tips & Warnings

• Start to look into a company by doing a Google search to see what results come up. This may make the process faster.

• Never provide private information to a company that is not thoroughly investigated.

References

• Better Business Bureau
• Angie's List