How to check out a company before you pay it: a 20-minute routine

Most of the bad payments I hear about were not made to clever criminals. They were made to a company nobody checked: a roofer who knocked on the door after a storm, an online furniture shop with lovely photos, a "debt relief" firm with a confident voice on the phone. The checks that would have caught most of them are public, free or nearly free, and quick. When I research suppliers for trade pieces, I run the same short routine every time, and once you know where to look it fits in about 20 minutes.

The stakes are not small. The Federal Trade Commission (FTC) said in February 2024 that consumers reported losing more than 10 billion dollars to fraud in 2023, the first year reported losses passed that mark, and that more money was lost through bank transfers and cryptocurrency than through all other payment methods combined. Those are only the losses people reported.

Set a timer. Each step below has a rough time budget. If a step turns up a serious problem, you can stop right there, because you have your answer.

Before the timer: four facts to get from the company

You cannot check a business you cannot name precisely. Ask the company, in writing if you can, for:

1. Its full legal name, exactly as registered, and the state where it was formed. The brand on a truck ("Ridge Pros") is often different from the legal entity ("Example Ridge Roofing LLC").
2. Its license number, if the work needs a license.
3. A physical business address, not only a PO box.
4. The website and the phone number it wants you to use.

A legitimate business answers these without fuss, because its bank, its insurer and its other customers ask the same questions all the time. Hesitation, a change of subject or "we're a new brand, the paperwork is still going through" is information too.

Put the answers on one sheet or in one note. Everything that follows is a test of whether these four facts agree with what public records say.

Minutes 0 to 4: the state business registry

Every state keeps a register of corporations, limited liability companies (LLCs) and other entities. In most states it sits with the Secretary of State; in a few, another body such as a corporation commission holds it. The National Association of Secretaries of State keeps a page that links to each state's business search, which saves you from guessing at addresses.

Search for the exact legal name and read four things.

• Whether it exists at all. If no entity with that name shows up in the state the company gave you, ask why. Small sole proprietors may not be registered with the state; they often file an assumed name ("doing business as") with the county instead, so try the county clerk's site as well.
• Its status. You want "active" or "in good standing". Words such as "dissolved", "revoked", "forfeited" or "administratively dissolved" mean the entity is not currently in order with the state, often because it stopped filing reports or paying fees.
• Its formation date. A company that says it has "served the area for 20 years" but was formed six weeks ago has some explaining to do. Rebrands happen, but then there should be an older entity behind the new one.
• Its addresses and registered agent. The principal address should match what you were given. The registered agent (the person or company that accepts legal papers on the entity's behalf) is often a commercial agent service, and that is normal.

A company formed in one state that works in another is usually required to register in the second state as a "foreign" entity. Check both records.

Buying from abroad changes the sources but not the logic. For suppliers in Argentina, our page on researching a business in Argentina walks through the equivalent registries.

Minutes 4 to 8: the license, if the job needs one

Many trades and professions need a state or local license: general contractors, electricians, plumbers, home inspectors, insurance agents, real estate agents, and roofers in many states. Search the licensing board itself, not the company's website. A license number painted on a van tells you nothing until the board confirms it.

California's Contractors State License Board is a good example of what a board can show. Its license check searches by license number, business name or personnel name, and the record covers status, classifications, bonding, workers' compensation and complaint disclosures. Boards in other states show less, but most show at least the status and any discipline.

Look for:

• The name on the license matching the legal name you were given.
• An active status and an expiry date in the future.
• A classification that fits the work. A painting license does not cover replacing a roof.
• Any disciplinary action or disclosed complaints.

For anyone selling investments, the Financial Industry Regulatory Authority (FINRA) runs BrokerCheck, which shows a broker's registration and disciplinary history. If the person selling to you is not in it, stop and ask why before any money moves.

Minutes 8 to 12: complaints, from three directions

The Better Business Bureau

The Better Business Bureau (BBB) is a private nonprofit, not a government office. Its letter grades run from A+ to F, and BBB describes them as its opinion of how a business is likely to treat customers, based on complaint history, transparency and public data. Skip the grade and read the complaints: what customers say happened, and whether and how the company replied. One angry complaint means little. Five complaints that all say "took the deposit and never came back" mean a lot.

Your state's consumer protection office

USA.gov keeps a directory of state consumer protection offices, most of them inside the state attorney general's office. Many publish press releases about lawsuits and settlements, and some will tell you on request whether they hold complaints about a business.

The CFPB database, for anything financial

If the company is a lender, a debt collector, a credit card issuer, a mortgage servicer or another financial firm, search the Consumer Financial Protection Bureau's Consumer Complaint Database. Complaints are published after the company responds or after 15 days, whichever comes first, so recent problems show up quickly. Read the bureau's own caution too: the database is not a statistical sample, and a low number of complaints does not prove there is no harm. Weigh a firm's complaint count against its size before drawing conclusions.

Minutes 12 to 15: regulators and courts

The FTC's Legal Library of cases and proceedings can be searched by name. A match there is serious, but confirm that the company in the case is the same one (same address, same people) and not just a similar name.

Then look for lawsuits. Federal cases are on PACER, the federal judiciary's online records system. According to PACER's pricing page, it charges 10 cents a page, caps the charge at 3 dollars per document and waives fees for anyone whose charges come to 30 dollars or less in a quarter. Most disputes between a business and its customers land in state court, though, and state court search varies widely: some states run one statewide portal, others leave it to each county.

What you are looking for is a pattern. Several small claims cases from customers, unpaid judgments, contractor liens and suits from suppliers who were never paid all point the same way. A single lawsuit is ordinary for a business of any size. A row of them from customers telling the same story is not.

Minutes 15 to 17: the website's age

For a business that lives mostly online, check when its domain name was registered. ICANN Lookup, from the Internet Corporation for Assigned Names and Numbers (the body that coordinates domain names), shows a domain's registration data, including its creation date and registrar. The owner's name and contact details are usually redacted for privacy. That is normal and not a red flag on its own.

What matters is how the domain fits the story. A shop that claims ten years of trading on a domain registered last month, or a "bank" whose site is a few weeks old, needs a very good explanation. While you are on the site, compare the legal name, address and phone on its contact or terms page with the state record. A site that names no legal entity anywhere is a reason to slow down.

Minutes 17 to 20: reviews, read like a skeptic

Reviews are the weakest evidence in this routine and the one people trust most. Read them for patterns rather than for the average score:

• A burst of glowing reviews posted within a few days, often short and vague.
• Reviewers with a single review to their name.
• Negative reviews that describe the same specific problem, such as deposits that were never refunded or crews that never showed up.
• Replies from the business that attack the customer instead of addressing the complaint.

On August 14, 2024, the FTC announced a final rule that bans fake reviews and testimonials, including AI-generated ones, along with buying reviews and suppressing negative ones through threats. A rule makes these practices illegal; it does not remove the fake reviews already posted. Treat reviews as a source of questions, not as proof.

The payment: red flags that end the routine early

How a company asks to be paid can tell you more than everything above. The FTC's advice on how to avoid a scam is blunt: scammers ask you to pay with gift cards, wire transfers, payment apps or cryptocurrency, and you should never pay someone who insists on cryptocurrency. The agency also points out that honest businesses give you time to decide. Pressure to pay today is a warning in itself.

Other signals worth a pause:

• A large deposit before any work starts or anything ships.
• Bank details that arrive by email, or "updated" account details halfway through a job. Before sending anything, call the company on a number you found yourself, not the one in the email.
• A payee name that does not match the legal name you checked.
• No written contract or invoice that names the legal entity.

When you do pay, a credit card gives you the most leverage. The Fair Credit Billing Act sets out a dispute process for billing errors, which include goods or services that were not delivered as agreed. The FTC's guide to disputing credit card charges says your dispute letter must reach the card issuer within 60 days after the first bill with the error was sent to you, so keep the paperwork and do not wait.

If you have already paid

Move fast. Contact the company you paid through (the card issuer, your bank, the wire service, the gift card issuer or the payment app) and ask for the payment to be reversed. The FTC's page on what to do if you were scammed goes through each payment method. Report the business at ReportFraud.ftc.gov and to your state's consumer protection office. If you also handed over card numbers, bank details or your Social Security number, our breach checklist sorts the next steps by the kind of data involved.

The one-screen version

Copy this into your phone's notes and run it before the next deposit:

1. Get the legal name, state of formation, license number and address in writing.
2. State registry: the entity exists, it is active, its formation date fits the story and the addresses match.
3. License board: active, the right classification, no discipline.
4. Complaints: BBB complaint text, your state consumer office, the CFPB database for financial firms.
5. FTC cases and court dockets: look for patterns, and make sure it is the same company.
6. Domain age on ICANN Lookup, set against what the company claims.
7. Reviews for patterns, not for the score.
8. Pay by credit card, and walk away from gift cards, wires, crypto and pressure.

More routines like this one are collected in our company research section.