As lawyers who form entities, there are a number of “hoops” we must jump through with our clients to get their business up and running. In some ways, our clients resemble a racehorse with their blinders on, solely focused on their goal of starting their new enterprise. And rightfully so! Fraudsters, however, loom large over our clients. Routinely, fraudsters send letters and emails to newly formed entities with official sounding letterhead, claiming the newly formed entity needs to pay a fee for some service claiming it is a necessary part of the formation process.
A Couple Examples
Attached below you will find two examples. In the first example, one company held themselves out as the “WA Certificate Service” and sent a letter stating that they required $82.50 in exchange for a “Washington Certificate of Status.” This company stated that “a Washington Certificate of Status is issued by the Secretary of State and may be required for loans, to renew business licenses or for tax or other purposes.”
In the second example, another company held themselves out as the “Labor Poster Center Department,” and sent a letter stating that they required $94.00 in exchange for a compliant labor law poster. They stated that “Your Business may be required by Federal Law to post a current compliant labor law poster in the workplace.” They even cited to “Federal Law 29 USC Sec. 666(i) & 2005 penalties.” When a newly formed entity receives a letter such as this, they may feel obligated to heed the letter and pay the money.
These sorts of companies intentionally imitate governmental authority and capitalize on the vulnerable state of determined new entities to scam them into giving them money. These fraudsters have been so successful that the Washington State Attorney General has issued an alert regarding these scams (see here).
Wisdom from Experience – Paralegal Tells All
One of the terrific paralegals here at Beresford Booth, Jennifer Takamoto, has seen these scams a million times over. Jennifer explains that nearly all newly formed LLCs will encounter at least one of these types of letters, and she does not blame clients for falling into the trap. The documents look official, and clients want to believe they are complying with the law.
We recommend that our clients who have newly formed entities consult us before paying anything they receive in the mail, no matter how official it looks. We recommend our clients allow us to serve as the registered agent for their entities. Allowing us to serve as registered agent directs all information to us, allowing us to sift through the junk and identify the necessities. If you know what you’re looking for, fraud is easy to spot.
Ironically, fraudsters actually will provide the service they solicit, whether it be a “Washington Certificate of Status,” or a “Labor Poster” or a “Certificate of Good Standing,” they simply charge $90 for something that may be unnecessary or can be obtained for free.
Considerations
Owners of newly formed entities often have the best of intentions but are susceptible to fraudsters. For questions about spotting fraud or the LLC formation process generally, email me at info@beresfordlaw.com or give me a call at (425) 776-4100.
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