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Industry Expert Answer How to Check If A Company Is Legit?

30 May, 2024

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As the world is now more interconnected with the advancement of technology, the challenges are even greater than the supposed business wins. From increasing revenue to escalating company growth, organizations experience multiple ups and downs. Nevertheless, one of the most significant challenges in the present era is still ensuring transparency while making ties with potential businesses. Many companies yet struggle with which companies they should make a tie with and how they can make sure that their potential partners are legitimate.

This in-depth guide explains how businesses can conveniently ensure company checks and save themselves from business and financial losses. Read on to get insights from industry experts on how to check if a company is legit.

Why Do Fake Companies Exist?

Many times, the origins of counterfeit companies are hidden financial interests. Here are some main causes and methods of operation of phony internet businesses:

  • Laundering of Funds: Money laundering is the process of legitimately obtaining criminal profits. Illegal money is sent via phoney companies, often ones that exaggerate their sales or profits to seem real. Usually existing solely on paper, shell firms are often employed for this reason.
  • Impersonation: To get loans or mislead consumers, entities pose as reliable individuals from respectable businesses or brands. They may raise credit ratings or con unwary people by leveraging the goodwill of legitimate businesses.
  • Shell Firms: Typically existing only on paper, shell firms are corporations without substantial assets or activity and are a traditional method of money laundering. Since they are often used to transfer money and hide the source of funds, they are priceless instruments for money laundering.
  • Avoiding Regulatory Authorities: False companies are designed to run covertly, out of sight of the government’s investigation of company activities. These organizations were established to hide the names of stakeholders so they may carry out financial crimes covertly.
  • Tax Fraud: Falsified tax return data is one way that phony businesses avoid paying taxes. They could utilize fictitious transfer pricing, inflate bills, or manipulate costs to move earnings across tax countries.
  • Scamming Investors or Customers: Frequently riding on the backs of the reputations of real firms, fake enterprises entice investors with promises of large profits or mislead consumers with imitation goods.

Understanding these aspects enables people and companies to spot and avoid possible fraudulent activity. In addition, it highlights the importance of why businesses must know how to check if a company is legit.

3 AML Experts (Shell Companies)

How to Verify A Business? 

Business verification is an extensive process that needs accurate implementation in order to save organizations from reputational and financial losses. Nevertheless, an intriguing question that arises here is how to check if a company is legit. The very first step in this process is to gather relevant business information followed by its verification.

Information Required for Company Check

Following is the primary information a business needs to have in order to check if a company is legit prior to business onboarding:

  • Legal Name of A Business
  • Registered Address of A Company
  • Document Proof That Company is Registered
  • Relevant Industry Documents
  • Tax Details along with TIN (Tax Identification Number)

5 Warning Signs Indicating the Illegitimacy of A Business

How to Check If A Company is Legit?

Companies can check business legitimacy once they’ve gathered all the required information. Nevertheless, here’s how businesses can collect all the desired information:

  • Legal Name and Company Registered Address

One of the critical pieces of information is the name by which a company gets registered legally. Businesses get officially registered in the directories of nations, such as the Secretary of State Portal in the US. This eradicates the chance of confusion with informal business names utilized by other companies. 

Furthermore, a legitimate company must have a physical presence in a real location. Failure to do so can indicate that it is a shell corporation, which is a company with no actual business operations and is often used to conceal illicit activities. 

A company might have many addresses, mainly if it works in several countries. To guarantee their legality, it is thus essential to confirm these locations using legitimate sources such as state Secretary of State websites and mapping applications like Google Maps.

Suggest Read: Business Address Verification: Securing Companies Onboarding Process

  • Business Registration Details

Business documents are the main proof of the legal status of any company.  For instance, in different regions of the world, this is often accessible through the official or non-official portals for every country. However, a major drawback here is that access may be restricted or fee-based. In addition, some portals or data sources can be contacted to get companies through an open data request, although this method is more expensive and may take longer.

The KYB features a data source directory that connects to each state’s portal. When a firm is profiled, it immediately retrieves the necessary data from the official website.

  • Retrieval of Industry License Documents

Some business models need to be registered with the government, but they also need to be licensed by other industry-specific regulatory bodies. These consist of businesses engaged in property ownership, insurance, banking, healthcare, construction, and logistics. Verifying that a company is adhering to these extra licensing guidelines is crucial. Any country’s official regulatory bodies hold such information. Checking this information with the relevant licensing body is helpful since it ensures the legitimacy of a particular business during company checks.

  • Tax information

Every lawful firm will have a special identification number that they use for all financial activities, including submitting tax returns. There are occasions when this is commonly referred to as a legal entity identifier (LEI), employer identification number (EIN), or tax identification number (TIN). If a business has this number enrolled, it is probably conducting honest and open business. In addition, most states have a site for their secretary of state that has this information. Verifying this information by comparing it to records kept by a tax authority, such as the Internal Revenue Service, is also a good idea.

  • Verification of UBO & Shareholder Details

It is critical to determine the UBO for several reasons, such as openness, anti-money laundering, and fighting fraud. Aside from building responsibility and honesty in commercial dealings, determining the UBO contributes to preventing the illegal usage of legal companies. Since a client’s profile may vary with time, for instance, a UBO may be sanctioned, engaged in high-risk operations, or just update their personal information—checks must be ongoing.

How to Check If A Company is Legit with The KYB? 

With so many scams and threats plaguing today’s businesses, verifying their credibility has never been more important. By using the Know Your Business solutions as described in this guide, companies can safeguard themselves financially and reputationally by ensuring that their prospective partners are legitimate.

With its extensive 300M+ Data Sources worldwide, The KYB as an industry leader, aims to help businesses struggling with how to check if a company is legitimate. Using legitimate governmental portals to quickly acquire relevant data, The KYB provides a unique mechanism for checking business information. Legal names, registered addresses, tax information, industry licenses, business registration paperwork, shareholder details, and confirmation of essential elements allow corporations to confidently evaluate a business’s validity. 

Staying proactive in confirming the legitimacy of potential partners is crucial to preserve your business interests. Include KYB in your due diligence process and rest assured that the businesses you are collaborating with are trustworthy. Now is the time to become the head of your company’s security. 

Get in touch with Know Your Business (KYB) experts today and make sure all of your company dealings are open and honest.

Frequently Asked Questions

  • How to Check if A Company is Legit in USA?

A company’s legal name and registered location are the first pieces of information you need to prove its legitimacy in the US. For correct information, you may check official state business registrations or visit the Secretary of State’s website. Also, check the official state websites for the company’s registration records, including incorporation paperwork. Particular licenses may be required for firms operating in particular areas, such as healthcare or banking. Make sure the firm has all the required licenses by checking with the appropriate regulatory agencies. In order to verify that the business is in compliance with its tax obligations, companies can contact the IRS or the state tax authorities using the company’s Tax Identification Number (TIN).

Find out who the shareholders are and who the Ultimate Beneficial Owner (UBO) is if it applies. Finally, get in touch with the Better Business Bureau (BBB) to learn more about the company’s validity and any complaints lodged against it, and be sure to verify reviews and ratings from credible sources.

  • How to check if a company is legit in UK?

To check if a company is legitimate in the UK, start by verifying its registration with Companies House. Ensure the company’s name, address, and registration number match the official records. Review any available financial reports and check for any warnings or complaints from regulatory authorities. Consider using online company verification services such as The KYB or consulting legal professionals for additional assurance.

  • How to tell if a company is a scam?

With KYB (Know Your Business), you can identify potential scams by verifying a company’s legal status, ownership details, and financial stability. Check if the company is registered with official authorities and has a valid tax identification number. Look for any discrepancies in the information provided, such as mismatched addresses or inconsistent business activities.

  • How to find out if an online company is legit?

To verify the legitimacy of an online company, businesses can check for a secure website (https://), read customer reviews and ratings, look for contact information (phone number, address), and search for any complaints or scam reports online. Additionally, organizations must research the company’s background and years of operation and check if they have a physical address or office.

  • How should I inquire about a company’s authenticity?

Businesses can hire third-party business verification services to check business legitimacy. Companies can contact The KYB to inquire into a business’s authenticity by verifying its registration details with official databases and state portals. KYB services check ownership information and financial stability, ensuring the company is legitimate. They also monitor for any changes in the company’s status and provide real-time updates.

Also Read: 3 AML Experts Answer How to Verify Ultimate Beneficial Owner (UBO) Amidst Its Challenges

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