Introduction
New organizations are public entities. All details in the Articles of Incorporation (including names, addresses, and phone numbers) are often public information. Some states require paid access to new filings, though most are accessible to the public on the Secretary of State’s website. As a result of easy access to public information, some businesses leverage this easy access to prey on unaware new organizations.
The scam
Within a week or two of filing, new entities receive a lot of mail that looks like official state documentation. These mailings typically cite statutory requirements or indicate additional steps for an additional fee to complete filing as a new company.
One of the most common scams is a Certificate of Good Standing. While the naming varies, all states have a form of this document. However, it is only necessary for particular circumstances, like setting up operations in another state.
Example:
"You are NOT required to purchase anything from this company and the company is NOT affiliated, endorsed, or approved by any governmental entity. The item offered in this advertisement has NOT been approved or endorsed by any governmental agency, and this offer is NOT being made by an agency of the government".
While the company notes in small print that they are “not affiliated with any state or government agency” and that businesses are not required to use its services, such a disclaimer may not be sufficient.
Helpful Tips
Here are a few tips for recognizing and avoiding these deceitful and preying scams:
- Read all letters closely: These “services” must disclose that they are not a government agency, not a bill or invoice, and not required by law. This small print allows organizations to send out these letters in the first place legally.
- Research your requirements: States, cities, and counties have online resources that disclose their requirements. You can also contact your local small business administration (SBA) there to help and guide small business owners. Whether you perform an online search or call up your local SBA, you should quickly learn whether the letter you received references an actual requirement or is a realistic-looking scam.
Summary
While Certificates of Status are legitimate and sometimes required, they should only be obtained directly from the Secretary of State’s office or website or through a known and trusted source, not an untrusted third party sending spammy emails or mail. Certificates of Status are also unnecessary for your business to be considered a valid legal entity.
In other words, most new nonprofit organizations will not need a Certificate of Good Standing.
Don’t fall for scare tactics: Often, these predatory scams rely on your fear of breaking the law. They may include warnings about financial penalties or even criminal charges should you not comply with their request! It’s important not to panic. Instead, call your state agency directly, consult with BryteBridge, another professional, or a dependable resource to learn more about your state or government requirements.