Sale of Business Opportunities

The Sale of Business Opportunities in Alaska

Business opportunities are prepackaged small business deals offered primarily to inexperienced entrepreneurs. Fraudulent business opportunities bilk consumers nationwide of tens of millions of dollars a year according to the Federal Trade Commission. These scams take a variety of forms, from stuffing envelopes or doing medical billing at home, to the sale of vending machines or greeting card display racks, to selling internet businesses. Promoters of these scams use high pressure sales tactics and promise huge earnings to buyers. They often target vulnerable Alaskans: senior citizens, individuals at home because of disability or illness, or people experiencing financial difficulties.

AS 45.66.010 - 45.66.900 is a new law regulating the sale of business opportunities in Alaska. As soon as regulations are adopted, sellers of business opportunities will have to register with the Department of Law before they do business in the state. In order to register, sellers will have to post a bond, pay a registration fee, and disclose information about the business opportunity and about the seller's civil and criminal history. AS 45.66 also provides important safeguards for consumers, such as the following:

  • Sellers must give a buyer a disclosure statement 10 days before selling a business opportunity. The disclosure must include information about the seller's legal and financial background and the total price and payment schedule for the business opportunity.
  • Sellers must use a written contract that sets out the payment terms, the services to be provided by the seller, delivery dates, and the buyer's right to cancel.
  • Sellers cannot accept more than 20% of payment up front, unless the additional amount is placed in an escrow account at a financial institution.
  • Buyers can cancel the contract within 30 days of purchase for any reason by providing written notice to the seller. Buyers can cancel after this 30-day period if the seller failed to meet disclosure requirements, made deceptive statements about the business opportunity, or failed to provide services.

Not all business opportunities are covered by this law. There are exemptions for business opportunities that involve total payments under $250, for business transactions that fall under other regulatory schemes, for ongoing business transactions, and for direct sellers under certain circumstances. The full list of exemptions is found at AS 45.66.220.

Under the bill, violations of the chapter are also violations of the Unfair Trade Practices and Consumer Protections Act, AS 45.50.471, et seq. In addition, they may be punishable as criminal offenses.

For more information about this topic, please visit the Federal Trade Commission's web site Franchise and Business Opportunities or read the Department of Law publication:

Registered Sellers of Business Opportunities

Registration Forms

Alaska Law

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