How To Check If A Company Is Legitimate, Real Or Scam

Updated by: Business First Family May 12, 2022 in Business

There are several important steps to successfully check and confirm that a company is legitimate. Frauds and scams are an ever-growing risk when working with new businesses. With massive cost implications, these potential threats can no longer be written off as errors or poor experience. Therefore, it is important to conduct thorough due diligence before working with a new company. As a small business owner, doing so is fundamental to protect your financials, compliance measures, and private company data. To help you get started, read on to learn about how to check if a company is legitimate.

This post will answer the questions:

How do I find out if a business is legitimate?
What are the best ways to verify a genuine company?
How to know if a company is real?
What does a legit company do?
How to tell if a company is fake?
How do I find out if a company is good or bad?

Research A Company

First and foremost, take the time to thoroughly research the company under evaluation. Start off by searching the company name using search engines like Google. Take it one step further and add “company name scams” to your search. This way, you can find out any recent information regarding reported fraud or scams. Simultaneously, you should research then company with notable organizations that examine business credibility. For a start, check their status with the Better Business Bureau (BBB) and Federal Trade Commission (FTC). Here, you will be able to find out if the company was recently reported as illegitimate, untrustworthy, or a scammer. Certainly, researching the company is an important step to analyze business legitimacy.

Simply, by searching online, you can research a company prior to working with them. There are many reasons to investigate a company. Here are some common motives for finding out if a company is legit:

Research a private company for investing
Perform due diligence in M&A deals
Research a company before an interview
Background check for companies
Investigation into business fraud
Verify business loan lender

Analyze Company Website

Next, examine the company’s website. Start off by checking for a legitimate physical address and telephone number. If there is no way to reliably contact the company, treat this as a red flag immediately. Then, browse their website to search for key indicators of professionalism, as well as any potential discrepancies. Once you have done so, read over the business’s online privacy pages.

If they are a genuine company, the website should use the following:

At a minimum, you should expect reputable companies to have both pages regarding their privacy policy, terms of use, as well as terms and conditions. Now, review their pages for high-quality, well-written content and consider the methods they use to process payments. Surely, analyzing the online startup business website is essential to ensure legitimacy.

Plus, you can check their website for:

Industry associations
Government registrations
Licensing and permits
Trusted references
Privacy policy
Terms and conditions
Registration numbers

Keep in mind, legitimate agencies will usually contact you from the primary domain email. Many small business loan scams use phishing emails to obtain payment upfront, personally identifiable information, or other fraudulent fees.

Use An Online Business Analyzer

Once you have done so, you may want to use an online business analyzer to check if a business is genuine. These advanced scanners are one of the quickest, most accurate and reliable methods to examine business validity. For example, you can use a tool like Casino Analyzer to check for online casino blacklists and avoid scammers. Using this online casino review database, you can easily scan thousands of trusted reviews, slots, games, and bonuses in seconds. This way, you can make accurate quality judgements, aggregate information, and discover new options. Indeed, using an online business analyzer is a great way to ensure a company is legitimate.

Commonly, business investment scams will sell illegal financial instruments. These companies pitch schemes that are simply too good to be true. These investment companies offer pyramid schemes, social media fraud, and boiler room scams. Before investing in a company, analyze them carefully to ensure they are legitimate.

Check Their Employer Identification Number (EIN)

Now, you are ready to check the company through their employer identification number. Nearly every businesses are required to obtain a nine-digit EIN number through the Internal Revenue Service, or IRS. This number is utilized to identify employer tax accounts, which signifies a legitimate business status. You can easily perform this search for free using an online EIN finder. If you are unable to find a number for the business you are considering, reach out and ask them why. Simultaneously, you can always research companies through their municipal or state tax ID numbers, which will also assess their validity. Absolutely, verifying an EIN number is important to ensure you are working with a genuine, trustworthy business.

Where to check EIN status:

Securities and Exchange Commission (EDGAR system)
State, city, or local government
Internal Revenue Service (for non-profits)
Chamber of Commerce database
Paid company background check
EIN search company for legal documents

Learn more about the EIN process:

If you are unsure, consider reading about the Warning Signs of Fraudulent Business Opportunity Scams.

Read Online Reviews & Testimonials

At this point, it is time to search for customer reviews, complaints, and other first-hand information. You can find reviews directly on search engines, as well as through specialized business review networks. Be sure to read multiple five and one star reviews.

Here’s some detail that will help you find out legit reviews:

This way, you can begin to develop an understanding of the company’s strengths and weaknesses. Similarly, you should flag any reviews with negative terms like “scam,” “fraud,” or “lawsuit.” Of course, this is pivotal to ensure that the business is trustworthy, reputable, and legitimate. Definitely, reading online reviews for positive feedback and complaints is essential to choose a legitimate business. Of course, there are many get rich quick scams out there. Or, you might need to check on a potential employer. To learn more about the company, you can check reviews in the following places:

Google reviews
Yelp reviews
Industry reviews
Online reviews
Website testimonials
Employer reviews
Social media reviews

While some scams and companies might be able to create a strong front, a little research into the company reputation can save you from getting scammed.

Connect On Social Media

To verify the legitimacy of a company, social media is a powerful tool. You should check the social icons on the company website. Click directly from their website to ensure that you get the official company page. In today’s digital world, legit companies have some social media presence with activity, followers and updates. Follow, comment and share posts. Further, search the company on various social platforms to see what others are saying about them. Often times, you can connect with current and former employees on LinkedIn.

Here are some effective strategies for connecting on social:

Or, you can read past interactions with customers on Facebook and Twitter. Plus, if you are dealing with an individual or small company, a direct connection on social media can certainly offer insight on their credibility and reputation.

Find Out About Ownership

After confirming the business location, inquire about the ownership of the company. This information can be verified against public corporate records. You can perform a background check of the owners, their history and the business entity. Cross-check these records with Anti-Money Luandering (AML) watchlists, scam websites and criminal databases. With a transparent ownership, you can learn more about the company you’re planning to do business with. Especially for ecommerce companies, legitimate ownership can offer strong verification.

Ownership verification is useful for confirming financial, investment and loan companies like the following:

Key Takeaways

There are several easy steps to check if a small business is legitimate. First, research the company in search engines, as well as across agencies like the Better Business Bureau (BBB) and Federal Trade Commission (FTC). Next, examine the company’s website for any key red flags. Once you have done so, use a digital business analyzer. Now, you are ready to check their employer identification number. At this point, it is time to read some reviews for positive testimonials, as well as negative customer feedback. Follow the points highlighted above to learn about how to check if a company is legitimate.

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