How To Use Disclosure Agreements For Home Work Business Opportunities
Have you ever given $5000 to a complete stranger? I have…
When I was in college I jumped on the bandwagon of a network marketing company that some of my friends joined. I saw all the leverage potential with the home work business opportunity, and I was as giddy as a school girl at a Hannah Montana concert.
I started to talk with everyone. If animals could speak I would have created a downline that would have made Noah jealous. My friends and family started to sign up because of my pure excitement. It only went so far before I realized that I had to find income in other places. Apparently you had to “market” in a network marketing company, but I didn’t get the memo.
I signed up a friend who had experience with internet marketing. He set up and marketed a web site that quickly got on the first page for several targeted keywords.
About a week later he told me that he signed up a man from the Philippines. What made this even more thrilling was that the company was about to open in that country. Now I started dreaming about me in rap videos with girls draped around me. Take that Flavor Flav!
This modern day Filipino miracle had loads of experience in network marketing with other companies and had huge connections ready to sign up. These key players owned franchised health stores in the Philippines where they could distribute the product. The only question I had left was, “Does my Mercedes-Benz SLR McLaren come with a flux capacitor?”
I had visions of swimming in a pool of money by that winter. I started communicating with our friend in the Philippines and he soon began asking for help, financial help. I figured what could that hurt? He seemed motivated and nice. He promised me millions, and we had a good conversation about the NBA finals over Skype. That is good enough, right?
You Can’t Always Get What You Want
What hurt us the most initially was that he couldn’t sign up anyone in that country because the MLM company was slower than molasses at getting an Philippines operating license. While we waited, he needed money for marketing supplies. Next, money for products, then funds for other people to sign up, and finally money for an office and office supplies. As the delay continued for the company to open in the Philippines, I went deeper and deeper into debt and despair. Bye bye flux capacitor.
Surprisingly, to the dismay of my 23 year old, genius intellect, he got frustrated and stopped responding to my emails. His wife gave me one last email, in broken English, telling me he had a nervous breakdown and couldn’t talk with me.
So there I was: young, in college, mounds of debt, a dying business model, an office in the Phillippines that I will never see, and still no flux capacitor.
Life Lessons
This was a perfect learning experience, but what did I need to figure out?
1. Never trust a man that tells me he will make me a million dollars in a night because we talk about the NBA Finals.
2. Never put all your eggs in one basket no matter how beautiful the basket may look. Diversify, diversify, diversify.
3. Before making any financial decision with business, take all legal action that you can in order to protect yourself in case anything goes wrong.
There are a few things in the business world you can count on: death, taxes, and scammers.
Although I was the upline in this situation, when you purchase a franchise or business opportunity make sure that you protect yourself and find legitimate home business opportunities. No matter how great the situation seems, someone could be your best friend one day and your enemy the next.
Disclosure
Before I proceed any further, I suggest you get a retainer for a lawyer if you can afford it. Even if you do find a solid lawyer that you would trust to walk your mother across the street, still make sure that you are aware by means of a disclosure agreement.
This form simply protects any potential buyer by making sure they are informed of any unpaid tax liabilities, penalties, or bankruptcies known to the seller. This document requires all qualified entities, shareholders, or beneficiaries entering into it that they must disclose all facts.
The disclosure form isn’t voluntary because of FTC regulation in 1979. Numerous states have their own disclosure laws for business opportunities and franchises. So make sure that any company you are buying is very transparent and willing to fill this out or else I would look at another business. If they suggest they are exempt, then demand a letter showing that they are exempt or contact information of the FTC office or local state agency that issued the exemption.
It is very rare that companies are exempt from disclosure agreements. One of the few ways a company can be exempt is if they are requiring less than $500 in the first six months of the transaction.
This is a great way to protect yourself and your interests when so many people feel deceived by business owners. It will also be a good initial test on the seller to make sure that you are thoroughly informed and if they can be trusted.
Harvey Firestone, founder of Firestone Tire & Rubber Co., said, “I believe fundamental honesty is the keystone of business.”
If sellers are thinking in the best interest of their investors, distributors, franchisors, etc. then they will always be open and honest with them. If they are not forward initially, then there is a good chance that habit will not change.
Be willing to call their bluff and always leverage with other business opportunities that are forward and honest.
Every prospective buyer of a business opportunity must receive the FTC disclosure statement at least 10 business days before signing a binding contract and also 10 days prior to any money transactions.
If they try to pressure you into signing then that is another sign that it isn’t worth it and they have something to hide. Often meeting face-to-face can solve this issue because many scam artists want to hide behind smoke and mirrors.
Make sure to bring your own legal representative to discuss a proposed sale or purchase of the business opportunity. They will know your rights and will protect you. Your legal representation will make sure the seller provides you with the disclosure at that time. If they proceed to hard sell you then they are required again by law to provide disclosure documentation on the spot.
Here are some other things to be aware of:
- Family Tree Companies have a way of being owned by parent companies that you might not be aware of, and could cause harm to your business and potential branding.
- No One Told Me That! Remember that stupid movie Santa Clause, with Tim Allen, where he signs the contract, but doesn’t realize a hidden clause that he has to become Santa. Business has a way of working the same way, but without the milk and cookies. You should know obligations to third party companies you have, to the seller, conditional clauses that are hard to fulfill, training and education you are obligated to have, rights with goods and services, etc
- Do I Get All The Bells And Whistles? That same network marketing company that I signed up with before had a clause that didn’t allow us to use the brand on the internet with any personal sites. I have no clue why that would hurt their marketing, but they felt it would diminish the traffic to their company site. We were given a letter to either terminate the site or terminate our distributorships. Know exactly all the trademarks, logos, media marketing, and exclusive benefits you may have. You need all the ammunition you can get.
- Follow The Rabbit Hole Hire a CPA or get someone that you trust with your bookkeeping and check the numbers. Find out exactly how money is being made and where it is going. You don’t want to get caught in a Ponzi scheme or something else that could cause bankruptcy, embarrassment, and potentially legal problems
This is as much your blog as it is mine and now the blog is yours.
Let me ask you what is your single most important question about home work business opportunities?
What brought you to Write To Right?
What would you want to see more of on this site about home work business opportunities that would excite you, but you can’t find?
This is your chance to make this site better one comment at a time. Feel comfortable to express your inner feelings and don’t hold anything back!
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Filed Under Home Based Business Opportunities, Small Business Opportunities, Starting A Business |
Tagged With bankruptcies known to the seller, disclosure agreement, dying business model, ftc disclosure statement, ftc office or local state agency, ftc regulation, home work business opportunity, legal representative, mlm company, network marketing company, unpaid tax liabilities
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It is painful to see your dreams shattered. But there is a lesson in it, never believe money would come pouring to you without any hard work involved.