The “Annual Business Registration” Scam

So I’ve got the letter too. What it is about?

Well, many of those who have formed a company in California (and probably anywhere else in the US) know the drill. Once it enters into the public records, you start getting all kinds of letters in your mailbox trying to defraud you one way or another. As a proud owner of a California Limited Liability Company, I was surprised it took them so long to try to get to me, but they did.

The drill is as follows:

Close to the anniversary of your company, you receive a letter from the “Annual Business Registration”, with a return address somewhere in Los Angeles. It quotes several different code sections dealing with various penalties, and makes the following to make it appear as an official demand for payment from the government:

1. The California Seal (with the words “The Great Seal of the State of” and “Eureka” removed, so that not to violate the CA law prohibiting using the California Seal)

2. In the corner it says “office use only” (to make you think it actually says “for official use only”, but it doesn’t, because its not official).

3. Due date (totally bogus, but very close to the date of mailing, sometimes says “immediately”)

4. Payment demand (for more than $200, whereas the State charges $20).

5. Form that requires very similar information to the official LLC12 form, but not the actual LLC12 form

And of course, at the bottom of the page, right before the signature, the text “I, we authorize Annual Business Registration to submit and file the Statement of Information of the LLC named above” – because that’s their goal, to have you pay them ten times more to file the statement of information every year, instead of you filing it yourself once every two years. Pure $380 gain from doing nothing. Just designing a page to make you think its official, while having you sign the explicit declaration that you want them to take your money.

Well, in California there’s a law against such things, AB 75, but as you can see – they work around it. Although, according to the law thy must explicitly say that the letter is not from a government entity, in a font 2pts larger than the largest font on theĀ  page (and at least 12pt), which in my case they didn’t do. So, it seems that they didn’t avoid breaking the law even though they’ve tried really hard.

If you’re thinking of opening a LLC or Corporation in California (or anywhere else), you need to keep things in mind:

1. In California it is illegal to use the State Seal for solicitation of business (see AB 75). If you see something that is seemingly official, but the Seal is not quite right (for example, doesn’t have the words “The Great Seal”) – walk away.

2. All checks for official LLC formation payments must be made out to the State agencies (Secretary of State, for example). Make sure to check, when you’re writing the check, that the entity you’re paying to is indeed a government agency. For example, check that their web site domain name ends with “ca.gov” (for California). If in doubt – Google it, if the first search result has “scam” in it, you should probably walk away.

3. Remember that the information about the business entities is in public records, so anyone can have your name, SOS number and address and mail you stuff. The fact that those appear on the letter doesn’t mean its legit. Privacy? Forget about it.

4. Know your requirements. Know when your statement of information is due, and where to send it. If you don’t know – check the site of the Secretary of State of California (or your State, if elsewhere).

5. The California government sits in Sacramento, not Los Angeles. Enough said.

6. Government official forms are written without embarrassing English mistakes. If the text looks like someone who writes blogs on the Internet “I, we” wrote it – it is probably so.

These scams work on ignorance, and not paying attention. Its your business, its your money, and you cannot succeed if you let fraudsters to take advantage of you at the very first stage – business formation. You have to pay attention, and have to make sure that you’re doing exactly what you think you’re doing, and nothing else.

Good Luck with your business,

Your Little Advisor

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