It has become painfully clear to consumers across the United States that personal identity theft is a major issue that should be safeguarded against. In fact, more than 15 million cases of stolen identities pop up every year. . . What might not be as obvious of an issue, however, is that business identity theft is a fast growing problem that business owners need to act on as well.
There are many ways thieves can steal a business’ identity – one of which can occur when a business entity exists in a dormant state. Perhaps the owner is in the process of dissolving the business when the state revokes or dissolves the entity. If the owner doesn’t complete the process, criminals may use the business’ information for B2B fraud, such as opening business lines of credit and leveraging the business’ hard-earned reputation. While criminals seek out as many vulnerability points as possible when engaging in business identity theft, dormant business entities provide a particularly tempting target.
Criminals assume, often rightfully so, that dormant businesses do not have the same scrutiny as active businesses do. The business owners no longer track potential credit accounts associated with a dormant entity, as they assume no activity is present. The criminals go through state filing systems and change critical business details to match information they use to open business credit cards and other accounts. In some cases, business owners have no idea what damage occurred because they weren’t monitoring a dormant business entity.
What happens if the business is dormant and it falls into criminal hands? One of business identity theft’s biggest draws is the larger payoff for criminals. Instead of dealing with a credit card or line of credit with a few thousand dollars available, they get access to tens or hundreds of thousands. If the dormant business has a good credit history and existing relationships with creditors, it could take some time before the theft is discovered. By then, the damage is done and hundreds of thousands of dollars in credit fraud is committed.
So how is this vulnerability eliminated? First, be sure to completely dissolve the business to eliminate the opportunity. If the business is completely eliminated instead of left dormant, the criminals have little to work with. Get approval, if necessary, from partners involved in the business in order to proceed with the process. Secondly, fill out and file the Certificates of Dissolution with the state, as well as any other necessary paperwork required for the region. Also, file all necessary tax forms with the IRS to indicate that the business is dissolved completely. Send out letters to the business’ creditors so they know the business is dissolved. If there are outstanding accounts with the creditors, settle these during the dissolution process. The last step in dissolving a business is giving partners a portion of the remaining business assets, if applicable.
Once this process is completed, criminals can no longer target a dormant business entity through the state filing system.
So what’s the bottom line? Be proactive in protecting against business identity theft. If a business closes, take the time to properly dissolve it, instead of allowing the business to sit dormant. It makes it much more difficult for criminals. Be sure to monitor your business credit report for any unusual activity.
The problem of business identity theft is growing, so maintaining awareness and making sure the proper safeguarding measures are in place is essential for every consumer and business owner.
Have you been a victim of business identity theft? We would like to hear from you, please send us a comment and tell us of your experience.