LaRose announces legislation to protect Ohio entrepreneurs

Ohio Secretary of State Frank LaRose joined State Senator Michael Rulli and Ohio Chamber of Commerce CEO Steve Stivers Tuesday to announce Senate Bill 98, legislation to protect Ohio entrepreneurs from business identity theft, business fraud and deceptive solicitations.

“We’ve made Ohio the best state in the nation to start and grow a business, and that means we need to look out for our entrepreneurs," said Secretary LaRose, whose office oversees the creation and registration of all businesses in Ohio. "In today’s tech-driven culture, businesses of all sizes face the growing threat of identity theft and fraud. This bill is designed to crack down on the bad actors trying to rip off Ohio’s job creators.” 

The legislation addresses four major problems facing Ohio entrepreneurs.

THE PROBLEM: Business identity theft and other fraudulent filings.

• Bad actors hijack an existing entity by appointing themselves as a statutory agent and then take over the identity of the business to secure loans without the intent to pay them back. They also attempt to grab unclaimed funds, steal the business’s checks, and deposit them into their own accounts. According to the U.S. Department of Justice’s Bureau of Justice Statistics, each year, one out of every ten people is a victim of identity theft. Similarly, businesses are increasingly becoming targets of business identity theft, resulting in potentially ruinous consequences. Dun & Bradstreet reported a 106-percent increase in business identity theft in 2018 and a 254-percent increase in 2020. 

• Bad actors can also use someone’s personal information such as their name or address without their authority to file a business. Using a victim’s information as the agent or authorized representative allows a new business to be registered and could connect a victim to the illegal activities of the business. Currently, the only solution for the victim to take this matter to a court and pay costly legal fees. Similarly, someone could dissolve a business without proper authority or submit another harassment filing that impacts the business owner’s ability to conduct business.

THE SOLUTION:

• Empower Ohio businesses and individuals to report when a bad actor has submitted a fraudulent filing or has taken over a legitimate business filing in an attempt to leverage it for fraud. When the complaint is received, it will be referred to the Ohio Attorney General for investigation. If the Attorney General determines the business filing is fraudulent, then the Secretary of State may cancel the fraudulent filing and redact the victim’s information. This allows the Secretary to take immediate action to protect Ohio businesses and significantly reduces the cost and time for the victim to get a resolution.
 
THE PROBLEM: Illegal reinstatement practices.

• Some bad actors reinstate a very old business without any connection to the business and then use the long history and/or good credit of the business to obtain a business loan or to apply for unclaimed funds. They may obtain a certificate of good standing from the Ohio Secretary of State’s office after reinstating the entity and then apply to do business in another state, open business bank accounts and use the business for illegal purposes.

THE SOLUTION:

• Limit reinstatements so a business may only be reinstated within two years from the date of cancellation. This reduces the opportunity for a bad actor to use old businesses for illegal purposes.

THE PROBLEM: Inaccurate Agent Addresses.

• It is a requirement for entities such as corporations, limited liability companies, and limited partnerships to maintain a valid statutory agent. These agents protect consumers and ensure there is a contact person for each business in Ohio. If a consumer has a dispute with a business, they must serve the statutory agent to initiate a legal action. Fraudulent businesses frequently use false address information or a PO Box address or a commercial mailbox address to hide their identity. This prevents a consumer from properly serving the business and it results in false information on the business database.

THE SOLUTION:

• Require an agent’s address to be a residential address or a business address. Do not permit the use of a PO Box or other commercial mailbox such as a UPS store.

THE PROBLEM: Deceptive mailings that mislead entrepreneurs.

• Ohio businesses are increasingly becoming targets of misleading mailers imitating official government entities and charging exorbitant amounts of money for government services that are usually provided free or at a very low cost. According to the Federal Trade Commission’s Consumer Sentinel Network, these types of scams rose by 45 percent nationally from 2019 to 2020. Common solicitations include expedited filings, UCC statement request forms, annual reports, certificates of good standing, and employee identification numbers. One common solicitation even upcharges a free service for $90. These mailers include official-looking seals, look very similar to government forms, and imply a company may be in jeopardy if they fail to comply.
 
THE SOLUTION:

• The bill will require these solicitations to include large and bold statements that clarify the solicitations are not being sent by a government agency. Also, this legislation requires these solicitations to provide the Secretary’s website URL, where the businesses can instantly acquire business documents. By requiring transparency and resources, this law will empower small businesses with the information needed to avoid falling victim to these malicious scams.