It has become increasingly simple to open a home-based business in recent years and this is motivating a lot of people to become entrepreneurs. Sadly, this has also opened up new ways for dishonest people and scammers to take advantage of inexperienced and unsuspecting newbie entrepreneurs. We have already discussed various types of online business scams which have caused a lot of people to lose their savings and remain stuck with loans to pay and no viable business to run.
Today, we would like to draw your attention to some business ideas you may find online – or even be openly invited to try – and which will cause you even more serious trouble: with the law and the IRS. These schemes look like legitimate businesses and are presented in a very tempting manner: light workload, huge earning potential. Actually, this should be the first and foremost red flag you should pay attention to when exploring any business idea.
Besides this one, here are five major red flags which you must take note of and steer away from before you get burned:
1. Pyramidal Make-Money Schemes
Before the internet era, this was called a Ponzi scheme and it has landed a major Wall Street investor in jail (you may have heard of the Bernard Madoff scandal). It works like this: you are requested to make a deposit and then convince a specific number of people (friends, family) to join an exclusive “make money” club. In exchange you are promised to receive at least 10 times the amount of money you “invested”.
2. Aggressive Pitch with Vague Actual Details
This is yet another generic red flag for scams with potentially dire legal consequences. You are being told over and over what an amazing opportunity it is for you and how it would be absolutely incredible and stupid to pass it. Your attempts to get any further details are thwarted with lots of big words and promises of huge earnings, but you do not really know what you are supposed to do.
3. Pointless Actions Rewarded with Lots of Money
Some of the most dangerous and illegal business ideas seem so simple that common sense tells you “why would anyone pay me for this?” However, the tempting rewards will soon convince you to accept running this type of business. It deals usually with:
⦁ Receiving goods, repackaging them and sending them on to another address
⦁ Lending your bank account for some obscure organization to transfer funds (the approach is very similar to the now famous Nigerian letter scams)
⦁ Cashing a check and transferring the money overseas.
In all these cases, you would be later investigated for receiving and shipping stolen goods, cashing falsified checks, and enabling terrorism and drug trafficking through payments made from your bank accounts. Now you do realize why these opportunities are too good to be true?
4. Secret Business Idea
You are approached by someone presenting themselves as a guru who has either developed a magic formula to make money overnight, or can pass you some insider information for investments.
In the first situation, you will most probably pay a lot of money for a “business plan” which never results in any revenues for you. In the second situation, you may join Martha Stewart on the list of people who used illegally obtained trader information and risk a prison sentence.
5. No Experience Needed
Any business idea claiming that you don’t need to have any experience to become a super-successful business owner is a huge red flag. Even if you buy a franchise where you are fully trained, you are still expected to have some background education or experience in that industry.
Actually, if you demonstrate experience and skills in the business you are being offered, the offer will soon disappear and you won’t hear anything from the people who contacted you. Your lack of experience and knowledge is what scammers are looking for to drag you into a trap and leave you to face the financial and legal consequences.
Now that you know these details, you can start seeking out legitimate home business ideas without risking your family’s savings and breaking the law at the same time.