Business Opportunity Laws
What Is a Business Opportunity?
A business opportunity involves the sale or rental of products, equipment, or services that enable the purchaser to start their own business. Usually, the party selling the business opportunity states that it will assist the buyer in securing a suitable location or market for the purchaser. Business opportunities are sometimes called “biz-ops” or “bizopps”.
A common type of business opportunity involves the sale of vending machines. The seller may sell one or more vending machine units to a buyer, while making a promise to find suitable geographic locations for the machines.
Note that the sale of a business opportunity is much different from the actual sale of business or franchise. In a sale of a business, the relationship between buyer and seller usually lasts longer than in a sale of a business opportunity. In contrast, once the sale of a business opportunity is completed, the parties generally don’t interact closely anymore.
How Are Business Opportunities Defined?
The term “business opportunity” is a specific legal phrase having its own meaning, and should not be confused with other phrases like corporate opportunity (a corporation’s rights in obtaining profits or business contacts).
There are four basic elements that make up a business opportunity:
- A market need
- The means to satisfy the need
- A method to apply the means, and
- A method to benefit from the endeavor
In some cases, all elements may be lacking except one or two. An innovative business opportunity can then arise by seeking ways to satisfy the remaining elements. If successful, there is great potential for finding or inventing a “niche” in a particular market.
What Are Some Common Legal Disputes Over Business Opportunities?
Business opportunities are sometimes associated with a number of legal issues. These can include:
- The seller engaging in fraud when making representations about the business opportunity
- The seller’s failure to follow up on a promise (such as failing to find a suitable location for the opportunity)
- The seller making misrepresentations regarding the amount of profit that the opportunity is expected to generate (i.e., overestimating profits)
- Sales of illegal products or services
Fraud is a common problem with regards to business opportunities. This is because many business opportunities are sold and marketed using 800- numbers. This means that the seller may be difficult to track down or identify. In the instance of a misrepresentation, the seller may simply “disappear” or become unavailable through the contact information they provided.
For these reasons, it’s best to exercise caution when researching a particular business opportunity. Be wary of any business opportunities that seem outlandish or that make promises that appear too good to be true. Federal and state business opportunity laws closely regulate the sale and operation of opportunities.
Do I Need a Lawyer for Help With a Business Opportunity?
Although they can be helpful, business opportunities should be approached with caution. It’s in your best interest to work with a lawyer when purchasing or selling a business opportunity. Your lawyer can help create a contract for your protection, and can represent you in court if you need to file a lawsuit in connection with opportunity.
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Last Modified: 01-06-2014 10:21 AM PST
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