What are the 5 Key Pieces of Information Required in the Disclosure Document in the Business Opportunity Rule?
At least seven days before prospective buyers sign a contract or pay any money for a business opportunity, you have to give them a one-page Disclosure Document that lists five key pieces of information. To keep things simple for you and the buyer, you must use the standard form. It's available at business.ftc.gov/businessopportunitydisclosure.
What do you have to disclose on that form?
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Identifying Information. You have to list your company's name, business address, and phone number; the sales person's name; and the date you gave the document to the prospective buyer.
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Legal Actions. You have to disclose whether your company or certain key personnel have been the subject of civil or criminal actions involving misrepresentation, fraud, violation of the securities laws, or any unfair or deceptive practices – including violation of any FTC rule – within the past ten years. If the answer is yes, you have to attach a list of the actions to the Disclosure Document.
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Cancellation or Refund Policy. You have to check a box to say if you have a cancellation or refund policy. If you do, you have to attach to the Disclosure Document a statement describing your policy.
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Earnings. You have to check a box to say if you've stated – or implied – how much money a prospective buyer can earn. If you have, you must attach an Earnings Claim Statement to the Disclosure Document.
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References. On the Disclosure Document, you have to list contact information for at least 10 people who have bought a business opportunity from your company. If more than 10 people have bought a bizopp, you may list the 10 who live closest to the prospective buyer. If fewer than 10 people have bought the bizopp, you have to list everyone. Also, you have to update the list every month, until 10 people have bought the bizopp. In addition, the Disclosure Document must say clearly and conspicuously: "If you buy a business opportunity from the seller, your contact information can be disclosed in the future to other buyers."
A few more things about the Disclosure Document: The prospective buyer has to sign, date, and return the form to you. You have to make sure you've attached any other documents the Rule requires. You have to update the form every quarter. And if you promote your business opportunity in a language other than English, the one-page Disclosure Document – along with the required disclosures – must be in that language. The Spanish-language form is available at business.ftc.gov/businessopportunitydisclosure. Furthermore, if you tell a prospective buyer something in person, in an email, over the phone, or in any other ad or promotion, make sure it doesn't contradict what you say in your written disclosures. It's illegal to make contradictory oral and written statements – and it just creates confusion.
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