How to verify a business is legitimate

Before you pay a deposit, sign a contract or hire a contractor, confirm that the business is what it says it is. Each of these checks is free. Together they catch most problems.

1. Get the exact legal name

Ask for the full legal name and the state it’s registered in. It should be on the contract, quote or invoice. A business that trades under a brand should be able to tell you the company behind it. Reluctance to give a legal name is itself a finding.

2. Find it on the state register

Search the state’s official business search for that name. Confirm three things:

It exists. There is a record under that name, or the name is a registered DBA of a company that exists.
It’s active. The status is active or the equivalent, and it is in good standing where the state shows standing.
It matches. The address and the people on the record are consistent with who you are dealing with.

A sole proprietor may have no state record at all. That’s legal, and it means you are contracting with a person, so check the license and identity instead.

3. Read the dates

A company formed last month that claims twenty years of experience needs an explanation. There can be a good one, such as a new entity for an old business. Ask.

4. Check the license

Registration isn’t a license. For regulated work such as contracting, real estate, insurance, health care and childcare, look the business up with the state licensing board. Confirm the license is current and covers the work you’re buying.

5. Make sure the details agree

Compare the name and address across the contract, the invoice, the website, the state record and the bank details you’ve been given. Money should go to an account in the company’s name. A request to pay an individual, or a company with a different name, deserves a direct question before you pay.

6. Look for a track record

Search the name with “complaint”, “lawsuit” and “scam”. Check reviews across more than one site and read the detailed ones. For larger sums, look at the local court’s online docket for cases naming the business.

7. For bigger deals, ask for proof

Ask for a recent certificate of good standing, proof of insurance sent by the insurer, and references you can call. Legitimate businesses are asked for these routinely.

Warning signs

No legal name, or a name that isn’t on any register
A record that is dissolved, revoked or delinquent
Pressure to pay today, in cash, by gift card or by wire to a personal account
An address that is only a mailbox, with no explanation
Details that change between documents

What a clean record doesn’t tell you

The state confirms paperwork, not quality or honesty. A current registration means the company exists and has filed its reports. It says nothing about whether it does good work or pays its bills. Use the register to rule out the obvious problems, then judge the business on the rest.

To read a record in detail, see what business search results mean.

Ready to check a name? Free preliminary check for all 50 states and D.C.

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