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Monday, February 05, 2007

How to Check Out a Business

by Joe Hoover

When dealing with another business entity or service provider, the common questions that must be asked are: “Can this company be trusted?” or “How much is known about this company?” Doing business in today’s reality is fraught with potential risks. There are news stories about contractors who secure deposits and then never return to do the job, or accounts about companies that defraud investors out of millions of dollars. Remember the recent national scandal regarding Enron Corporation.

When intending to establish a relationship with a company, it is important to be certain that they are reputable, and that their image is not marred by liens, judgments, bankruptcy or civil action, either against the entity or its principals.

The following straightforward steps can save a business many future problems in dealing with a new entity:

FINDING BASIC COMPANY OR PRINCIPAL INFORMATION

Always start at the local level, especially for a small company, as this may be the only source of information available. All companies must conform to local laws or codes, since they essentially are rooted in a community. City or county records are a good place to start. These will provide information as to the origin of the business, tax liens, judgments filed and criminal complaints or actions pending against the business or its principals. And this information is normally public record and available to all who ask.

The Chamber of Commerce and Better Business Bureau are important sources, as most maintain open records of complaints filed against the company or its principals. If the company is in construction or equipment servicing, the local Registrar of Contractors should be queried.

Published articles can expand search parameters regarding the company or its principals. It is easy to check by business name and the names of individuals through the Internet, local newspaper archives or in industry-specific journals. One important service is Lexis Nexis News, which will do the legwork for a fee.

CHECK THE COMPANY’S REPUTATION AND REFERENCES

References can be an excellent source of confirmation of both a company’s reputation and its ability to live up to its commitments. Before doing business with or hiring a company to perform a service, it is imperative that references be contacted by either telephone or e-mail. Generally clients or former clients will provide a well-rounded picture of the company in question and its personnel.

Another valuable reference, especially in the financial area, is the company’s vendor list. Anybody who provides either goods or services to a company can attest to their credit worthiness.

Business and professional licensing provides still one further source of important information regarding a business or professional entity. This is especially significant with regard to any company from which services are contracted. Such companies often list their license numbers on their business card, knowing that potential clients may wish to check upon their reliability and integrity. If the business uses a trade name, then it is also important to obtain the names of the owners or managing principals. Many governmental agencies have special “Doing Business As” files that cross reference company trade names with owners or directors.

Important agencies that maintain public records containing detailed information for business and professional or corporate entities and their operatives include:
  • Secretary of State’s Department of Professional Regulation
  • State Accountancy Board
  • State Corporation Commission
  • State Registrar of Contractors
In most states, the Secretary of State’s office has a corporation division database that enables searches on partnerships, corporations and LLC’s.

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