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Work-At-Home & Business Opportunity Scams

Scam artists lure both would-be entrepreneurs and people looking for home-based work with false promises of big earnings for little effort. They pitch their fraudulent offerings on the phone, and through websites, infomercials, and classified ads that are designed to get you to call them.

If you receive a call from a telemarketer offering you a way to make lots of money, remember that financial success generally requires hard work. Think twice before you invest your money or your time. Here are some tips to keep in mind:

If you're considering a work-at-home opportunity:

Legitimate work-at-home program sponsors should tell you — in writing — what's involved in the program they are selling. Ask the promoter:

  • What tasks will I have to perform? (Ask the program sponsor to list every step of the job.)

  • Will I be paid a salary or will my pay be based on a commission?

  • Who will pay me?

  • When will I get my first paycheck?

  • What is the total cost of the work-at-home program, including supplies, equipment, and membership fees?

  • What will I get for my money?

Then ask yourself whether the claims are based on wishful thinking — or real market conditions. The answers to these questions may help you determine whether a work-at-home program is appropriate for your circumstances, and whether the claims can be realistic.

If you're considering a business opportunity or a franchise:

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. Make sure you get this disclosure document before you agree to invest. Use the disclosures in this document to compare business options or simply for information. The disclosure document includes:

  • Names, addresses, and telephone numbers of at least 10 previous purchasers who live closest to you.

  • A fully audited financial statement of the seller.

  • Background and experience of the business's key executives.

  • Cost of starting and maintaining the business.

  • The responsibilities you and the seller will have to each other once you've invested in the opportunity.

Before you buy a business:

  • Study the disclosure document and proposed contract carefully.

  • Interview current owners in person. (They should be listed in the disclosure document.) Visiting them in person may help you identify any who are "shills" - people paid to give favorable reports.

  • Investigate claims about your potential earnings. Some companies may claim that you'll earn a certain income or that existing franchisees or business opportunity purchasers earn a certain amount. Companies making earnings representations must provide you with the written basis for their claims. Be suspicious of any company that does not show you in writing how it computed its earnings claims.

  • Sellers also must tell you in writing the number and percentage of owners who have done as well as they claim you will. Keep in mind that broad sales claims about successful areas of business - "Be a part of our $4 billion industry," for example - may have no bearing on your likelihood of success. Also, recognize that once you buy the business, you may be competing with franchise owners or independent business people with more experience than you.

  • Listen carefully to the sales presentation. Some sales tactics should signal caution. For example, if you are pressured to sign immediately "because prices will go up tomorrow," or "another buyer wants this deal," slow down. A seller with a good offer doesn't use high-pressure tactics. Under the FTC's Franchise and Business Opportunity Rule, the seller must wait at least 10 business days after giving you the required documents before accepting your money or signature on an agreement. Be wary if the salesperson makes the job sound too easy. The thought of "easy money" may be appealing, but success generally requires hard work.

  • Get the seller's promises in writing. Any oral promises you get from a salesperson should be written into the contract you sign. If the salesperson says one thing but the contract says nothing about it or says something different, it's the contract that counts. If a seller balks at putting oral promises in writing, be alert to potential problems and consider doing business with another firm.

  • Consider getting professional advice. Ask a lawyer, accountant, or business advisor to read the disclosure document and proposed contract. The money and time you spend on professional assistance, and research - such as phone calls to current owners - could save you from a bad investment decision.

FTC Publications

More Resources

  • To verify state laws that apply to franchises and business opportunities in your state check your state Attorney General's website

Ads for envelope stuffing, craft assembly, medical billing and generic "computer work" are often come-ons for work-at-home schemes that make big promises but don't deliver.