DOB: Understanding Business Opportunity Investments - Know Your Rights

Understanding Business Opportunity

Concerning Business Opportunities

{Reading a business law book in the library}

In Connecticut, the Connecticut Business Opportunity Investment Act regulates business opportunity offers and sales.  Federally, the Federal Trade Commission (FTC) has a rule on franchise and business opportunity ventures which requires the preparation of a disclosure document for prospective purchasers.

Under Connecticut law, before a seller may offer a non-exempt business opportunity to the public, the seller must register the business opportunity.  The Securities and Business Investments Division of the Department of Banking will review the seller's registration application, supporting documents and the disclosure document that the seller will give to you.  The FTC, by contrast, does not review disclosure documents.

The Division checks the seller's disclosure document to see if it contains enough information to enable you to make an informed decision on whether to buy the business opportunity.  The Division also looks for misleading or fraudulent statements in the materials.  By law, the Division cannot substitute its judgment for yours or endorse any particular business opportunity.

If the Division considers the materials complete, the business opportunity will be registered. The seller may then begin to make offers or sales in Connecticut.  Offers may be made through classified advertising in Connecticut newspapers, direct mail, radio station announcements, business opportunity trade shows, Internet web pages and postings or other means.

Under Connecticut law, you are entitled to receive a copy of the disclosure document at least 10 business days before you sign a business opportunity contract or at least 10 business days before the seller receives any money from you for the business opportunity. This 10 day "cooling off period" gives you time to look over the disclosure document before you make a legal commitment or hand over any money to the seller.

If you buy a business opportunity and the seller uses untrue or misleading statements in the sale, doesn’t provide you with a disclosure document, fails to deliver the goods or services needed to begin substantial business operations within 45 days of the delivery date stated in the contract or fails to provide you with a contract that complies with Connecticut’s business opportunity statute, you can void the contract.

If you void the contract, you can recover those sums you paid to the seller.  However, you must return to the seller all products and supplies in your possession. If you are able to prove that you have been damaged by a violation of the Connecticut Business Opportunity Investment Act, you can also sue the seller in court for breach of contract and recover damages plus attorney's fees. The statute of limitations for breach of contract actions is six years.

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