Required in 21 states: Alabama, Alaska, California, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Michigan, Nebraska, New Hampshire, North Carolina, Ohio, South Carolina, South Dakota, Texas, Utah, Virginia and Washington
The cost of a bond, or the premium, is determined by the bonded amount and the rate that a business pays for the bond. Each state’s laws and regulations decide the bonded amount, typically between $15,000 and $50,000. Every state will decide the bond amount differently. For example, a $25,000 bond is needed in Texas for more than $500 business opportunities. While in North Carolina, a $50,000 bond is required for any business opportunity seller that guarantees a profit.
After the bonded amount is determined, the next factor determining the premium is the rate a business will pay for the bond. Think about bonds like a loan from the bank. Only a percentage of the loan needs to be paid for to purchase it. Surety companies will look at various factors, but the applicant’s credit score and the business's financials will have the most significant impact. Businesses in great financial standing or applicants with a high credit score will receive a lower rate for their premium. Applicants with a bad credit score or poor business financials will pay a higher premium and may have difficulties getting approved for a bond. In our experience, the premium for these bonds is usually between 1%-10% of the bonded amount.
Each surety company will rate each bond differently depending on their perceived risk. That’s why we’ve partnered with over 10 surety companies to offer our customers the best rates. Let us know if you find a better rate, and we’ll be happy to do our best to beat it!
Each state will define a business opportunity differently, but in general, a business opportunity is a packaged business investment that allows the purchaser to start their own business. Most commonly, this would be selling a service or product to help the purchaser run their business. A great business opportunity will be one that can lead to more profit for the purchaser. Because of that, some sellers may exaggerate the potential profits to get a sale or fail to follow through with their agreement once a sale is completed.
Every state has different requirements for when a business opportunity seller bond is needed. Generally, for states requiring the bond, it will be required if a business opportunity seller if the sale price is over a certain threshold or if there is a profit guarantee. If you’re unsure if a bond will be needed, you can check the state websites or call us. Our team of bonding experts are ready to help.
Currently, only some states require business opportunity sellers to register, and each state will also have different boding requirements. Right now, only Alabama, Alaska, California, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Michigan, Nebraska, New Hampshire, North Carolina, Ohio, South Carolina, South Dakota, Texas, Utah, Virginia and Washington have laws in place for business opportunity sellers. It’s best to check with the governing body in these states before purchasing a bond to be sure about the requirements.
A claim can be filed against a business opportunity seller bond if the seller breaks the state’s laws and regulations while selling their business opportunity. Many actions can lead to a claim being filed, but failing to fulfill promises such as profit or misrepresenting the product or service, along with any other illegal practices, will lead to a claim being filed against this bond.
Once a claim is filed, the surety company that is providing the bond will investigate the claim to determine the validity and value of the claim. If the investigation finds that the claim is valid, the surety company will pay up to the bonded amount for the financial damages that the seller caused. After the claim has been paid out, the seller must reimburse the surety company for the amount paid for the claim. If the business fails to reimburse the surety company, then a claim violation will be left on its record, making it more difficult for the business to be bonded in the future.
It’s best to avoid claims being filed on your bond by following all state laws and regulations and ultimately fulfilling your contract with the purchaser. Operating a legal and honest operation is the number one way to avoid any claims being filed against your bond. If a claim ends up being paid out, it’s essential to repay the surety company to avoid any future issues getting a bond.