Texas Business Opportunity Act
When a small business owner seeks to expand via franchising or offering investment opportunities, the Texas Business Opportunity Act (TBOA) comes into play. This act requires that businesses file disclosure statements relating to business opportunities such as franchises. It also prohibits deceptive practices. Business owners need to understand that if they are seeking to expand through franchising or offering investment in a business opportunity, both of these activities are regulated by the Federal Trade Commission (FTC) as well as the Texas Business Opportunity Act (TBOA). These two groups cover similar ground but the TBOA addresses a few different areas of business opportunity.
The TBOA only applies to the advertisement and sale of business opportunities that require the investor to pay at least $500 for products, supplies, equipment, or services to start the business. If the seller also promises that the investor is likely to make enough profits to get the initial investment back, then that too falls under the rules of the TBOA. Also, the TBOA regulations only apply if the seller promises a) to provide or find the location for the business; b) to provide a sales, production, or marketing program; or c) to buy back the products that the investor produces.
When a business opportunity falls within the TBOA’s definition, the seller is required to register with the Secretary of State and file a disclosure statement before the seller can advertise or offer the opportunity for sale. The disclosure statement must be given to potential buyers a minimum of 10 days before the buyer signs a contract or pays any money. The TBOA prohibits deceptive practices as well.
When a business is found to be in violation of the TBOA and the Texas Deceptive Practices Act, they leave themselves open to civil and criminal lawsuits that can involve payouts into the tens of thousands of dollars. Compliance with these acts can be ensured by consulting with a Texas business attorney.
For more information about the Texas Business Opportunity Act, contact Texas Legal Entities. They work hard to make sure that you are making the best decision for the success of you and your business.
At any time, please feel free to ask us a question. It's FREE!