The rapid increase in the number of online business work from home scams has prompted the implementation of laws at the federal and state level to stem the tide of commercial corruption. Also referred to as seller-assisted marketing plans, business opportunities receive regulatory scrutiny from the Federal Trade Commission (FTC) Business Opportunity Rule and by the business opportunity laws enacted by 25 states. The FTC Business Opportunity Rule falls within federal statutes 16 C.F.R. Part 437.
Overview of FTC Business Opportunity Rule
The FTC version of the Business Opportunity Rule regulates just one type of online business opportunity, such as the operation of a digital marketing sole proprietorship. On the other hand state business opportunity rules regulate more than one type of business opportunity. Under FTC guidelines, a business opportunity can include scenarios when “the seller sells goods or services which are supplied by the seller or a person affiliated with the seller.” Every online business opportunity venture that qualifies for regulation under the FTC Business Opportunity Rule must disclose business activities by submitting the FTC Disclosure Statement. Most of the 25 states that have enacted some form of business opportunity regulation use the FTC Disclosure Statement because the federal version mandates more comprehensive disclosure requirements.
How States Regulate Online Business Opportunities
The 25 states that have enacted business opportunity legislation have made subtle changes to the federal version of the general business opportunity disclosure statement. Twenty states require registration or some other type of legal notice that permits online business opportunities to advertise within each state. Registration fees for online businesses run between $10 and $500, with additional fees charged for changing and renewing registrations.
State Franchisor Exemption
Several state business opportunity laws allow exemptions for franchisors that comply with FTC franchise regulations. Other state business opportunity statutes exempt franchisors that implement marketing programs associated with federally licensed trademarks. Trademark registration requirements vary among the states that permit business opportunity law exemptions. If a trademark is not registered with either the Principal Register or Supplement Register of the United States Patent and Trademark Office, but a franchisor has file an application for a trademark, state business opportunity laws consider the application as not federally registered.
Requirement of Audited Financial Statements
Any business opportunity application that falls under the FTC Business Opportunity rule must submit three years of audited financial statements. Although most of the 25 states that have implemented business opportunity laws do not require the submission of audited financial statements, a few states such as Maryland, Minnesota, and Connecticut require audited financial statement submissions as part of the business opportunity registration program. Start-up online businesses that operate in any of the states that require audited financial statements should begin the process by submitting an audited opening balance sheet
California Business Opportunity Law
If you want to start an online business opportunity in California, you must file a registration within 45 days. California requires the submission of a Disclosure Document, which lists the names and addresses of the entrepreneurs who want to sell or start an online business opportunity in the state. State law mandates the collection of personal data from at least 10% of the owners involved in the sale or start-up of a business opportunity. The Disclosure Document must file with the State of California within 48 hours before the signing of an agreement or the consummation of a business transaction that involves an exchange of money.
Online business work from home scams have not only increased in number, but the scams have also become much more elaborate. To determine whether you should invest in an online business or start a work from home digital enterprise, contact a licensed attorney who has gained experience handling online business law cases in the State of California.