In the skilled trades, we often accept work from people we know little to nothing about, often with some form of contract, but especially for small jobs this can be a simple as a verbal agreement. When collecting payment, we’re often taking these people at their word. With communities become more populous and alienated, the social pressures that once existed to enforce these contracts have all but vanished. There are luckily a few things that a tradesman can check before doing business to minimize risk. Granted, this is not a fail-proof approach; I’ve been burned by people I’ve vetted this way. However, you can at least minimize the risks.
Check that their trade name is registered and in good standing. The state secretary’s office manages this records and most states’ records are online now. Try searching for “your state”, SOS. This will provide several valuable pieces of information.
- How long they’ve been in business
- Do you see numerous DBA changes? Has the business owner told you they’ve been in business for decades, but is working under a new trade name?
- Their business address or registered agent
- Many legitimate businesses use registered agents for a number of reasons, but it could be an attempt to obscure the primary stakeholder’s identity.
- Legal name
- Does their legal name match the name they’ve given you?
- Are there other businesses filed by the same person?
- Filing status
- If they haven’t kept up with their tax filings, they will be in delinquent status. If they don’t pay the state promptly, will they pay you?
If their address listed is a home address, check the property records. Do they own their home? While there’s nothing wrong with renting, it’s not exactly normal for a successful contractor to still be renting, especially when they have the tools and income to buy an affordable home and remodel. Do they have poor credit? Is it their real address? I wouldn’t necessarily rule out doing business someone based on this alone, but it is the beginning of a trend.
These records are held by the respective county in which the person resides. Many property assessors records are now online and searchable by multiple criteria.
- Chain of Title
- Has the home in foreclosure?
- Is the contractor still the current owner?
- Is the property owned by a landlord or other party?
- Another name to vet for business entities
- Former HUD
- There are very specific criteria that must be met to qualify for a HUD home, most of which would disqualify a successful businessman.
Contractors Licensing Office
Many cities are beginning to make their contractor databases publicly searchable. Is this licensed contractor active for the county and building classification you’re supposed to be working on?
Check permutations of the contractor’s full legal name, nicknames, maiden names, etc. Have they had businesses in other states recently? Are they still active? In good standing? How is their rating with the Better Business Bureau? Are they members? Check contractor review and lead generation sites for their names and trade names. What are customers saying? Are there any reviews from former employees or subcontractors? Tip: Use quotation marks to tell google exactly what you want.