FTC FACTS for Consumers

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Looking to Earn Extra Income?

Here’s How to Avoid Bogus Business Opportunity Offers

I t’s easy to see why ads for business opportunities appeal to people who want to make extra money: The ads promise good pay and ideal working conditions. But, 

as many who have answered these ads learn – and as the Federal Trade Commission (FTC) 

has found – many business opportunity promotions are scams that take people’s money up 

front and fail to deliver on the promises.

If you’re a would-be business owner, what can you do to make sure you don’t respond to an 

ad for a bogus business opportunity? First, do your homework, including getting pre-investment information in writing. Under the Business Opportunity Rule, which is enforced 

by the FTC, most potential business purchasers have the right to receive information about 

the earnings potential of a business opportunity. Most legitimate business opportunity 

promoters don’t hesitate to give this information. 

Second, research other aspects of the business’ performance. One way to do that is to 

personally interview other people who have bought into the program.

Spotting Clues to a Scam

Spotting fraudulent business opportunities is no easy task, but there are certain clues: One 

may be the type of business opportunity being advertised. Fraud is most often associated 

with vending machine, display rack, medical billing, mystery shopping, work-at-home, and 

some internet-related business opportunities. 
Facts for Consumers 2

Promotions for fraudulent business opportunities 

are common: you will find them in the classified 

pages of daily and weekly newspapers and magazines, and online. They also may be marketed in 

television infomercials and commercials.

The ads use similar bait: Good pay (say, $350 

a day; $2,000 a week; $160,000 a year) and an 

ideal work situation – the ability to set your own 

hours, be your own boss, and work from home.

What the ads don’t say is that the people behind 

these so-called business opportunities really 

aren’t interested in helping you run a successful 

business. That’s because they’re running a 

scam. To get you to buy in, they may mislead 

you about the business opportunity’s earnings 

potential and promote a “phantom” opportunity 

that has little chance of succeeding – for 

example, a business with little or no market. 

They may doom your chances of success by 

providing cheap, low-quality, or out-dated 

merchandise; offering supposed “experts” 

with no expertise; or ignoring your questions 

and concerns. 

While fraudulent business opportunities prey on 

consumers, they also harm legitimate businesses. 

To evade the law, they often jump from one 

city to the next, leaving behind unpaid bills for 

newspaper ads, office rent, phone bills, mail 

delivery, and other services.

An Ounce of Prevention 

If you’re considering a business opportunity, do 

your homework first:

•	 Read the ad carefully. If it claims buyers 

can earn a certain income, then it also must 

give the number and percentage of previous 

purchasers who achieved the earnings. If an 

earnings claim is there – but the additional 

information isn’t – the business opportunity 

seller probably is violating the law. 

•	 Get information in writing about how 

much money you can make. If the business 

opportunity costs $500 or more, the 

promoter may be required to back up his 

claims in a written document that includes 

the number and percentage of recent clients 

who have earned at least as much as the 

promoter suggests. Even if the opportunity 

involves an investment of under $500, it’s 

a good idea to ask the promoter to put the 

earnings information in writing.

•	 Study all materials the business 

opportunity provides. Under the FTC 

Business Opportunity Rule, most business 

opportunity promoters are required to 

provide certain documents to potential 

purchasers, which include information about 

the company, including whether it has faced 

any lawsuits from previous purchasers or 

lawsuits alleging fraud. Look for a statement 

about previous purchasers. If the document 

says no one has purchased this opportunity 

and the seller offers a list of references, be 

skeptical: the references probably are phonies.

•	 Interview each previous purchaser in person, 

preferably where their business operates. The 

FTC requires business opportunity promoters 

to give potential purchasers the names, 

addresses, and phone numbers of at least 10 

previous purchasers who live closest to the 

potential purchaser. Interviewing them helps 

reduce the risk of being misled by phony 

references.

•	 Contact the attorney general’s office, state 

or county consumer protection agency, and 

Better Business Bureau – both where the 

business opportunity promoter is based and 

where you live to find out whether there 

is any record of unresolved complaints. 

Do a few internet searches by entering 

the company name, or the name of the 
3 Facts for Consumers

company’s CEO or president, and words like 

“complaints” or “scam.” While a complaint 

record may indicate questionable business 

practices, a lack of complaints doesn’t 

necessarily mean that the promoter and the 

business opportunity don’t have problems. 

Unscrupulous dealers often change names 

and locations to hide a history of complaints.

•	 If the business opportunity involves selling 

products from well-known companies, call 

the legal department of the companies whose 

merchandise you would promote. Find out 

whether the business opportunity and its 

promoter are affiliated with the company. Ask 

whether the company has ever threatened 

trademark action against the business 

opportunity promoter.

•	 Consult an attorney, accountant, or other 

business advisor before you put any money 

down or sign any papers. Entering into a 

business opportunity can be costly, so it’s best 

to have an expert check out the contract first. 

If the promoter requires a deposit, ask your 

attorney to establish an escrow account where 

the deposit can be maintained by a third 

party until you make the deal. 

•	 Take your time. Promoters of fraudulent 

business opportunities may hype a “no risk” 

refund policy and use high-pressure sales 

tactics to get you to buy in before you’ve 

researched the opportunity. Don’t rely on 

a refund policy or money-back guarantee 

as a substitute for checking out the offer: 

scammers will make it virtually impossible 

for you to get your money back. And if the 

business opportunity is legitimate, it’ll be 

around when you’re ready to decide. 

Report Possible Fraud

If you suspect a business opportunity promotion 

is fraudulent, report it to:

•	 the state attorney general’s office both where 

you live and where the business opportunity 

promoter is based. 

•	 your county or state consumer protection 

agency. Check the blue pages of the phone 

book under county and state government. 

•	 the Better Business Bureau in your area and 

the area where the promoter is based. 

•	 the FTC. File a complaint online 

at www.ftc.gov or call toll-free 

1-877-FTC-HELP (1-877-382-4357). 

The FTC works to prevent fraudulent, deceptive 

and unfair business practices in the marketplace 

and to provide information to help consumers 

spot, stop and avoid them. To file a complaint 

or get free information on consumer issues, 

visit ftc.gov or call toll-free, 1-877-FTC-HELP 

(1-877-382-4357); TTY: 1-866-653-4261. 

Watch a video, How to File a Complaint, at 

ftc.gov/video to learn more. The FTC enters 

consumer complaints into the Consumer 

Sentinel Network, a secure online database and 

investigative tool used by hundreds of civil and 

criminal law enforcement agencies in the U.S. 

and abroad.

1-877-FTC-HELP FOR THE CONSUMER

FEDERAL TRADE COMMISSION ftc.gov

March 2011