Before You Do Business: Run A Business Background Check

Just as companies may for one reason or another perform credit and criminal checks on you, so can you perform business background checks on them.

Companies will often perform company background checks on their clients (or potential clients) to weed out non-payers, the frequently-litigious, those in poor financial shape (ie. up to their ears in debt or - worse - on the brink of bankruptcy), and other undesirable associates. Before doing business with any new and unfamiliar company, you may want to perform a similar business background check on them to make sure ahead of time that they're deserving of your business.

Whether you're conducting a business background check on a lawyer, a contractor an accountant, a financial planner, a stockbroker, or any other service professional, you'll at least want to know the individual's (and their company's, when and where relevant):

specialties, areas of practice/expertise
valid and active licenses
educational background
professional affiliations
awards or honors
professional memberships
disciplinary actions
complaints
rumors
relevant Civil Court records
address history
real property owned
listed phone number history
aliases

A solid business background check will also reveal corporate and limited partners, affiliates, and associates of a business.

If the business is a corporation, the business background check should also identify the entire Board of Directors and all officers and agents, the corporation's filing date and corp. ID, as well as any UCC (Uniform Commercial Code) filings.

A stockbroker must be licensed by the SEC and their firm should be a member of SIPC (the Securities Investor Protection Corporation). A financial planner should be CFP (Certified Financial Planner) board certified.

Law firms are particularly important companies to run company background checks on before signing contracts - their competence and trustworthiness could cost you dearly in time (like jail time) and money. So, even after you've found satisfactory the results of a business background check on a law firm and have decided to do business with them, you must be very careful to pay attention to the language of the contract you are about to sign.

Many lawyers include a compulsory arbitration clause that prevents you from suing them should they fail to live up to the agreement. The American Bar Association does not find this practice unethical as long as the lawyer doesn't complete insulate him or herself from liability and you the client understand what compulsory arbitration means (that you can't sue). Make sure before you sign a contract that you know what you're agreeing to, and you know what rights you may be giving up.

One area on a business background check that can tell you a lot about a professional is the amount (and frequency) of continuing education that they undergo. All the businesses mentioned so far experience regular changes in their laws and practices, and whomever you choose to hire should be up to speed on all of them.

After you've evaluated the competence of a businessperson to perform the service they advertise, you might next want to investigate how competent they are at running a business. Companies over their heads in debt could become a liability to you later. What if, for example, a company went out of business before fulfilling their end of your contract?

Fortunately, you can make sure that the business background check you conduct also includes credit information on that business, including current and prior creditors, payments and late payments, loans in default, overdue debts, liens, bankruptcies, and more.

You can conduct a business background check to determine an "alleged" executive's position in a business. You can run a business background check to determine a business's assets. A business background check can tell you all sorts of financial and operational information about a business and its people. It's so easy and cheap to run a business background check these days, and there are so many ways that one can save you from tons of trouble, there's no reason to do business with anyone without one.

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