Blog | Entrepreneurship

Protecting Your Business and Self from Scams

How to Avoid the Con-Man

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At some point in all of our lives we’ve met that person who could sell water to a drowning man—confident, smoothe-talking, and the best friend we all need but didn’t know it.

He’s the person with great sincerity who earns the trust and confidence of his victim. He’s the guy who you would feel comfortable babysitting your first-born child.

Sadly, the con-man isn’t any of those things, and he’s more likely to steal the social security number of your first-born child. Be aware of the wolf in sheep’s clothing.

Here are three popular scams plaguing small businesses and how to avoid them:

$99 Incorporation

You may have seen the late-night commercials for the popular “$99 Incorporation” offer to small businesses. How could you pass up avoiding all that paperwork for a measly hundred bucks?

You know what they say, “If it sounds too good to be true, it probably is.” Here’s why:

My team has tested several of these low-priced, do-it-for-you offers and we found that such services fall into two camps.

The first camp does minimal work, files the articles, takes your money, and you never hear from them again. They fail to send you minutes, the bylaws, or any issued stock documents, or all of the other components required to be a complete corporation. This camp leaves you and your business completely unprotected.

The second camp offers its services in more of an a la carte menu in which they will file your articles for $99 but any thing else can cost upwards of $3,000—obviously none of this is mentioned in that original commercial.

Be cautious and only hire reputable providers to incorporate your business.

Nevada Office Package

Not many people have heard of the Nevada Office Package, but this is by far one of the biggest scams out there.

During the sales process, Nevada providers will misrepresent Nevada law and will tell you that if you set up a Nevada corporation the state’s law requires you to have a Nevada office presence, which they conveniently provide for $3,000 per year.

I’ll be clear: There is no Nevada law requiring your corporation, LLC, or LP to maintain an office in that state. Yes, you need a resident agent to accept service process but that will only cost you $125 per year.

Tax Scams

I’m all in favor of structuring my affairs in anyway possible to reduce taxes. I attempt only to pay the absolute minimum in taxes. We all should. There should be no societal rule that says you should pay more than what is required. The IRS agrees with me.

Former IRS commissioner, Mark W. Everson warns, “Don’t get taken by scam artists making outrageous promises. If you use a tax professional, pick someone who is reputable. Taxpayers should remember they are ultimately responsible for what is on their return even if some unscrupulous preparers have steered them in the wrong direction.”

Taxpayers attempting to use any of the forty frivolous positions recently issued by the IRS could face penalties from $5,000 to $25,000, along with civil penalties based on tax preparations.

Along with the other scams mentioned, the con-man preparing your taxes will, in the weight of pressure from the IRS, disappear and leave you to answer to the IRS. Ignorance is not an excuse, be careful who you are listening to.

For more information on scams you should avoid, get a copy of my book, Start Your Own Corporation.

Original publish date: October 17, 2018

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