Phishing for Small Businesses: Protecting your business from scammers
"Why am I getting letters/emails asking for money for a certificate of status after establishing my entity?"
By John Carlos Mouw
Nowadays, scams are a part of daily life. People use channels such as email, phone, mail, and even social media to try to take advantage of others. Sometimes scammers want money, but other times they simply want your contact information. In an age where information is power, these can be scary. Even scarier is when your new business you worked so hard to establish is getting pestered with official-looking letters asking for money in exchange for documents you didn’t even know existed.
Scams like these often look very different than personal scam letters or emails you might receive. They take advantage of the uncertainty new entrepreneurs have about regulations, licensing, and legal protections. The best thing you can do is educate yourself on what these scams look like and on what real legal and government documents you need to turn your startup into a growing enterprise.
1. What are the letters you may receive?
Letters you may get are attempting to take advantage of unsuspecting new business owners. These letters will normally cite some statute and say that you need a labor law poster, certificate of status, or an employer identification. Without these, they say, you cannot operate your business, get loans, establish lines of credit, hire employees, or perform some other business function. They will look official by including the names of other legitimate departments you may have already dealt with when establishing your business entity. They may include a seal and state that the letter they sent you is certified. Scammers may even go the extra mile and have the letter sent from the state capital. In the end, all these letters follow the same format: an official-looking name/seal, an ID number, an “urgent” due date, a paragraph referencing your recently established business, a list of what they say you need and why with their prices, possibly a penalty for not complying, and a section to include contact/payment information[1].
2. When will you receive one of these letters?
You may receive these types of letters after recently registering your business with the state government[2]. These will usually have some information on you and your business and reference your recent filings with the state to seem official[3]. These letters may also come in after you simply form your business entity[4]. The timing is meant to take advantage of the newness of your enterprise and tag onto the legitimate processes you just went through.
3. What is a certificate of status/existence/good standing?
A certificate of status/existence/good standing is essentially a document that confirms that your entity is registered with the jurisdiction of formation (your business’s home state), confirming that it exists and/or is in good standing with the state[5]. This document from the Department of State costs much less than scammers will write in the letter, usually between $0-50[6].
The usual process for receiving one of these is by going to your state’s Department of State website for corporations (such as Sunbiz.org in Florida or INBiz in Indiana) and entering your entity’s name, the registration number if you have one, the document number, and contact information[7]. In most states, just like when establishing your entity, you prompt the process of getting a certificate of status. Receiving a letter prompting you to purchase a certificate of status is unusual, and some states don't even offer such a certificate[8].
4. When do you need a certificate of status/existence/good standing?
You do not need the certificate to do business in your state, as scammers might imply, but there are some legitimate circumstances where you will need one[9]. Some of these include when competing for a government contract, opening business bank accounts, getting business insurance, forming contracts with other businesses, registering to do business beyond your state, selling your business, processing credit/debit payments, and renewing some licenses[10].
5. Tips for Catching These Scams:
Check whether the organization sending the letter is a real government agency.
Look up the usual process for receiving the documents mentioned in the letter in your state.
Go to your state’s website to see if the document mentioned in the letter even exists in your state. If the document exists but under another name, that is also a clear sign of a scam.
DO NOT call the number or visit the website listed on the letter.
If you still have questions, have the letter(s) reviewed by a legal team to determine legitimacy.
Disclaimer. This article is for general information only. The information presented should not be construed to be formal legal advice. By using this blog site, you understand that there is no attorney-client relationship between you and the blog site publisher. The blog site should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.
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About CORPlaw. Headquartered in Miami, FL, CORPlaw is a boutique business law firm that helps modern entrepreneurs grow and protect their business. Founded in 2017, this minority and female-owned law firm has advised countless small businesses owners, startups, and creatives through the state of Florida, the national, and abroad. The CORPlaw team continues to grow and build a reputation of professional excellence and client satisfaction. Contact CORPlaw today at 1 (833) 545-7526, info@corplaw.us, or on our website (www.corplaw.us).
[1]BBB Scam Alert: Don’t pay for free labor law posters, Better Business Bureau (Oct. 15, 2021), https://www.bbb.org/article/news-releases/26028-bbb-scam-alert-dont-pay-for-free-labor-law-posters [2] Scams, Pennsylvania Department of State (March 22, 2022), https://www.dos.pa.gov/BusinessCharities/Business/Resources/Pages/Scams.aspx [3] Id. [4] Id. [5] How Can I Get a Certificate of Existence or Good Standing?, IN.gov (June 1, 2022), https://faqs.in.gov/hc/en-us/articles/360034159551-How-can-I-get-a-Certificate-of-Existence-or-Good-Standing- [6] Jenna Lee, What’s a Certificate of Good Standing? And How Do I Get One?, Gusto (May 20, 2019) https://gusto.com/blog/start-business/certificate-good-standing#Do_I_need_a_certificate_of_good_standing [7] Order Certificate of Status, Florida Department of State: Division of Corporations (June 6, 2022), https://dos.myflorida.com/sunbiz/manage-business/certification/certificate-status-efile/ [8] Scams, Pennsylvania Department of State (March 22, 2022), https://www.dos.pa.gov/BusinessCharities/Business/Resources/Pages/Scams.aspx [9] Jenna Lee, What’s a Certificate of Good Standing? And How Do I Get One?, Gusto (May 20, 2019) https://gusto.com/blog/start-business/certificate-good-standing#Do_I_need_a_certificate_of_good_standing [10] Id.
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