FTC Issues Warning on Small Business Scams
Small business owners are advised to pay attention to a fight in Congress over a bill which would repeal a particularly onerous tax on small business.
HR-3594, sponsored by Amo Houghton, R-N.Y., Wally Herger, R-Calif., and John Sweeney, R-N.Y., would repeal a so-called “stealth tax” on the proceeds from the sale of a business.
This little-known tax was signed into law Dec. 17. The provision requires businesses to pay the full tax burden of a sale up front , even if the proceeds are to be received in installments over several years.
Jim Talent, R-Mo., chairman of the House Small Business Committee, called the tax “a small business killer,” affecting more than 260,000 businesses nationwide. Most businesses with less than $50 million in annual revenue rely on installments sales, he said.
“This pay-now, collect-later provision is wrong. It requires honest, hard-working small business owners, who have spent years building up a business, to either drastically reduce the price or seek out buyers who can pay cash. It ties their hands and will kill thousands of potential sales just by the threat of the lump sum tax burden. We must repeal this tax that hurts small business,” he said.
More than 110 other members of Congress are behind HR-3594, which would repeal the tax.
“The last-minute tax, snuck into the tax package at the 11th hour, was never considered to be the small-business killer it is,” Talent said. “We must allow small businesses the right to negotiate sales without the threat of Uncle Sam eagerly awaiting lump sums of cash without thinking of what it does to the entrepreneur. It’s the least we can do.”
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Buyer Beware: In an era of economic fast times, people become increasingly attracted to offers allowing consumers to “be your own boss,” “work from home” or “earn money quickly.” But many of these turn out to be scams.
Prospective business owners can take steps to make sure they’re not taken in by fraudulent business opportunities. Before investing in any opportunity, the Federal Trade Commission has a number of tips.
– Get all earnings claims in writing. If the promoter hesitates or refuses to give the information, move on.
– Interview references provided by the promoter. Talk to each prior purchaser face-to-face, preferably where the business operates. This reduces your risk of being misled by “shills.”
– Study the business opportunity’s franchise disclosure statement. It includes information on the company, including whether it has faced any lawsuits from previous customers, or lawsuits alleging fraud.
– Contact the attorney general’s office, Better Business Bureau and other sources to find out if the promoter has a history of unresolved complaints.
– Consult an attorney, accountant or other business advisor before putting down any money or signing any papers.
For more information, or to make a complaint, call the FTC at (877) FTC-HELP, or visit them online at (www.ftc. gov).
Small Biz Bits: More than 3,100 small- and mid-sized businesses have sold in California since the start of the year. People looking for a central clearinghouse for buyers and sellers can now log on to a Web site (www.AllCalifBiz.com). The Web site has been running for the past six years. The Greater San Diego Chamber of Commerce’s Emerging Business Center will launch several “business owner roundtables” later this year. Featuring monthly facilitated peer-to-peer sessions, these workshops will help small business owners improve their businesses. For more information, call Adelina Ortega at (619) 544-1355. … If your San Diego business is facing regulatory problems, the Small Business Advisory Board may be able to help. The board, a project of the Small Business Administration, is comprised of local business owners active in civic affairs. Its mission is to focus on helping make San Diego a more business-friendly community. For meeting dates and other information, call the Office of Small Business at (619) 685-1392.
