Business Opportunity Laws

A business opportunity, also known as a “bizopps” or biz-ops”, often involves the sale or rental of products, services, customer accounts, inventory, equipment, and/or various other business assets. The sale or rental of such items will then enable the buyer to create and start their own business.

In most scenarios, the party who is selling the business opportunity will often promise the buyer that they will help them to secure a suitable venue or carve out a unique market. This may often be done to assist them in profiting from the business opportunity.

For instance, one common type of business opportunity involves the sale of a vending machine. In such a case, the party may sell one or more vending machines to a specific buyer and also promise to help them find a well-suited location wherein the buyer can set up the vending machine that they purchased.

In addition, it is important to understand that a sales transaction involving the selling of a business opportunity is very different from the actual selling of a business or a franchise.

For example, when a party sells a business, the relationship between the seller and the buyer will usually last longer than the relationship formed between the parties during the sale of a business opportunity. Franchises are also governed by different laws and go beyond the initial stages of a business.

In contrast, any parties involved in the sale of a business opportunity will normally not interact any longer once the business opportunity transaction is complete. Additionally, unlike a standard sale of a business, only 23 states have adopted laws to regulate business opportunities, such as California, Utah, Texas, North Carolina, and Florida.

Lastly, to learn more about the laws and requirements of purchasing or selling a business opportunity, you should speak to a local commercial law attorney as soon as possible. An attorney will be able to provide valuable advice about the laws in your area and can perform a due diligence check on the business opportunity or the individual with whom you are entering the transaction for a specific business opportunity.

How Are Business Opportunities Defined?

In general, a “business opportunity” is a specific legal term that is made up of four primary elements. The four main elements that give rise to form a business opportunity include the following:

• A need in the marketplace;
• A means to satisfy the identified need in the marketplace;
• A method to apply those means; and
• A way to benefit or profit from the overall endeavor.

In some situations, a business opportunity may be lacking all except for one or two of the above factors. Thus, a new and exciting business opportunity can be developed simply by finding ways to fulfill the remaining factors. If a party is successful in satisfying all four elements, then there may be a strong possibility that they will invent or discover a niche in a particular market.

As previously discussed, only twenty-three states have enacted a law that recognizes business opportunities. There is also a federal law called the “Federal Business Opportunity Rule”, which defines the sale or offer of a business opportunity as a commercial arrangement that includes:

• A solicitation made by a seller that entices a prospective purchaser to buy a new business opportunity;
• An agreement that requires the purchaser to pay the seller for their offer of a business opportunity;
• A representation made by the seller that is either implied or written, made orally or put into writing, that promises the seller or the seller’s agent will either:
  • Repurchase any services or goods that the buyer changes, produces, creates, makes, or provides;
  • Set up a location for the buyer to use or in which they may operate their equipment, displays, inventory, vending machines, and/or any other similar device that is owned, controlled, paid for, and leased by the buyer; or
  • Provide the buyer with business accounts, customers or contacts, or outlets that they can use to prosper in their new business opportunity.

One final detail to keep in mind about business opportunities is that although they are very similar in nature, a business opportunity should not be confused with other business jargon, such as a “corporate opportunity.” Briefly, a corporate opportunity refers to a corporation’s right to obtain benefits like profits and business contacts, but only relates to a corporate entity.

What Are Some Common Legal Disputes Over Business Opportunities?

There are a number of legal disputes that can arise over business opportunities. Generally speaking, some common legal disputes that are often associated with business opportunities may include the following:

• When a seller fails to follow up on a promise that they make under an oral or written contract, such as not renting out a suitable space to execute the business opportunity;
• If a seller makes fraudulent remarks or misrepresents aspects of the business opportunity being discussed;
• When a seller misrepresents the amount of profits they expect a business opportunity to generate for a party (e.g., overestimating revenue); or
• If a seller is caught marketing or selling products and/or services that are considered to be illegal.

Out of the examples in the above list, fraud is the biggest issue that affects business opportunities. The reason for this is because many business opportunities are marketed and sold by using a 1-800 number. This can make it very difficult to identify or trace back the contact information to a seller.

For example, a seller can misrepresent a situation and then simply disappear or make themselves unavailable by disconnecting or screening the number that they provided to prospective buyers. This allows the seller to profit off of the business opportunity and to vanish before the buyer gains any benefits or realizes it is a scam.

As such, it is best that all persons involved in a particular business opportunity conduct a thorough due diligence check for both the business opportunity and the seller. Business opportunities that seem like a strange offer or involve promises that seem too good to be true probably are and thus should be approached with caution.

In addition, an individual that is researching a business opportunity may also want to hire a commercial law attorney as an extra protective measure. An attorney will be able to inform the individual of any federal or state business laws that could potentially affect the sale and operation of a specific business opportunity.

Do I Need a Lawyer for Help With a Business Opportunity?

While business opportunities can certainly be a profitable way to boost your company, any business opportunity should be approached with caution and weighed against the benefits and/or risks. Therefore, it may be in your best interest to consult with a commercial lawyer in your area for further legal advice on selling or purchasing a certain business opportunity.

An experienced commercial lawyer will be able to review any legal documents associated with your business opportunity and can ensure that you are in compliance with local and state laws. Your lawyer will also be able to draft a contract to protect your business interests.

In addition, your lawyer will be able to provide legal representation in civil court as well if you wish to file a lawsuit against a party over a dispute involving your business opportunity transaction.