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Many small businesses are at risk for business identity theft, which is the misappropriation of your business identity by criminals. Corporations and LLCs may be at greater risk that other types of businesses because state laws require that much information about the business and its owners be publicly available. For example, most states require an annual report that lists the ownership or management of the company, as well as its principal office and registered agent’s name and address.
These disclosure laws are designed to protect the public from unscrupulous business owners, but in this digital age those protections can be used by lawbreakers against the businesses.
Criminals seeking to steal a business’s identity can file documents amending information with the secretary of state and use those fraudulent documents to obtain credit and financing. Ultimately, this can cost the business significant amounts of money, damage its credit rating, and harm its reputation with customers and vendors. Fortunately, there are some simple, straightforward, common-sense actions that every business owner can (and should) take to reduce the risk of business identity theft.
All of these strategies rest on the premise that identity thieves—like most criminals—are after the “easy mark.” For a business owner, this translates to someone who routinely misses filing deadlines for state-required documents (or worst yet, ignores filing requirements) or who does not monitor that activity on the business’s accounts.This general rule of “constant vigilance,” to borrow the catch-phrase of Mad-Eye Moody in the Harry Potter books, translates into the nine actions outlined below.
File your Annual Report on time. Nothing says “I’m not paying attention,” like missing an annual report deadline. That is like waving a huge sign that saying: “Steal my information.” Yet, because many deadlines are tied to the date you formed your company, rather than coinciding with tax filing deadlines, the date can be easy to overlook.This is particularly true if you are operating in multiple states—each of which has its own due date—it can be easy to miss one. For this reason, many companies partner with CT to make sure they don’t miss an annual report filing.
Verify the accuracy of your business information. Make it a priority to verify your business information on a regular basis. In most states, this information is readily available on the secretary of state website by searching your company name. Schedule a quarterly check and record it on your calendar. To make it easy to remember, you might tie it to when file your estimated taxes or payroll tax forms.
Keep your state-required information up-to-date. Most states require a filing if the company changes its name, method of management (for an LLC), number/types of stock authorized (for a corporation), or its registered agent. Many also require notification if the principal officers or business address changes. Keeping this information updated helps ensure you receive notifications from the state—and sends a message to would-be thieves that you are paying attention to the details.
Don’t provide more information than is required. While corporations and LLCs must disclose certain types of information, make sure that you do not provide more than is required. For example, if your formation state does not require disclosure of LLC members’ names, do not do so.
Get email alerts from the secretary of state. If you are fortunate enough to do business in a state that offers email notifications when someone changes your company information, register for that service. Unfortunately, not all states have taken the initiative to provide email alerts. Check the secretary of state website for your formation state and for each of the states where you are registered to do business to see if this option can help your business.
Obtain a commercial credit report for your business. Anyone can obtain a commercial credit report, regardless of the reason for doing so. With that in mind, it is wise for you to obtain a copy of your business’s credit report, at least annually. This will help you spot unauthorized actions. And, as a bonus, it provides you with valuable information regarding how your business looks to potential lenders and vendors.
Sign up for fraud alerts with credit reporting agencies. Each of the big three credit reporting agencies (Experian, Equifax, TransUnion) provides services designed to help businesses protect their credit ratings from a wide variety of threats. Visit the websites and determine what resources are best suited to your business needs. In the same vein, explore whether it makes sense to monitor your business’ credit profile with Dun & Bradstreet.
Don’t post sensitive information on your company website. A surprising number of companies post sensitive information—such as the federal Employer Identification Number—on their website. While you want your website to be informative and to engender trust in your customers, make sure that you limit the amount of information that you disclose to anyone who searches for your company name. (This also makes it more challenging for scam-artists to brand-jack (impersonate) your website.)
Educate yourself about business identity theft. Learning more about the risks faced by businesses will help you protect your company more effectively. One excellent resource is BusinessIDTheft.org, which is a joint project of the Identity Theft Protection Association and the National Association of Secretaries of State. In addition, many states provide information, including reports of recent scam-related activities, on their secretary of state websites.
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