The FTC's New Business Opportunity Disclosure Laws

In March, the FTC implemented new business opportunity disclosure laws that have a significant impact on how business opportunies may be promoted and sold to prospects.

The Disclosure Document

One of the key elements of the new law is the requirment to provide a disclosure document at least seven days prior to accepting payment from a prospect.

The disclosure document must contain specific information about the business opportunity:

• Identifying Information. You have to list your company's name, business address, and phone number; the sales person's name; and the date you gave the document to the prospective buyer.
  
  
• Legal Actions. You have to disclose whether your company or certain key personnel have been the subject of civil or criminal actions involving misrepresentation, fraud, violation of the securities laws, or any unfair or deceptive practices – including violation of any FTC rule – within the past ten years. If the answer is yes, you have to attach a list of the actions to the Disclosure Document.
  
  
• Cancellation or Refund Policy. You have to check a box to say if you have a cancellation or refund policy. If you do, you have to attach to the Disclosure Document a statement describing your policy.
  
  
• Earnings. You have to check a box to say if you've stated – or implied – how much money a prospective buyer can earn. If you have, you must attach an Earnings Claim Statement to the Disclosure Document.
  
  
• References. On the Disclosure Document, you have to list contact information for at least 10 people who have bought a business opportunity from your company. If more than 10 people have bought a bizopp, you may list the 10 who live closest to the prospective buyer. If fewer than 10 people have bought the bizopp, you have to list everyone. Also, you have to update the list every month, until 10 people have bought the bizopp. In addition, the Disclosure Document must say clearly and conspicuously: "If you buy a business opportunity from the seller, your contact information can be disclosed in the future to other buyers."
  

Many of the new business opportunities popping up on the web, including the ones at the top of my red flag list - BitCoin MLMs - seem to be completely ignoring these requirements.

These new guidelines may be why some of these companies are launching with no information on thier business address, executives, or any contact info other than a generic form on their business opportunity website.

If you are considering buying into a business opportunity, be sure you are offered and receive a Disclosure Document prior to paying any fees.

If you are offering a business opportunity, be particularly aware of possible consequences if your business opportunity does not offer the required Disclosure Document, as well as the Earnings Claim Statement where it may apply.

Different states also have their own business opportunity laws that vary from state to state, but most require registration of any business opportunity with a sign-up fee of $300 or more.

Be aware, guard your hard earned money, and watch out for potential red flags with any business opportunity.