Understanding/clarifying vendor qualifications
 

Hi,

I understand to be an approved vendor, one has to pay sponsor fees on the site.

However, is there a mechanism to verify that it is a legitimate business? I've heard plenty of horror stories about poor customer service from "official sponsors" of the site, yet they all revolve around poor communication.

I feel like not all these vendors are legit businesses; that is, they are not in possession of a reseller license/business permit for the state/county/city they reside in (and are doing business out of).

I understand we all want to make money, but to protect members (which, frankly, drive the site growth with traffic) something needs to be done to make sure these vendors are legit.

Questions are:
- Are vendors vetted to ensure they are a business?
- If they are a business, what is the procedure to verify?
- If there are no current processes, can one be put in place to ensure they are a legitimate business?

A discussion on this would be beneficial for the site and all members...

-alex

It would be very good to implement one, I agree with OP 100%.

Beyond checking for a business license (which is really a state issue) how should one verify that they are a business? What if they are in another country, what are the verifications there? Now I wouldn't be opposed to verification of some sort, I'm not saying that but I'm also not sure there are that many that won't have a business license

I am one of those who gave FA20Club a shot. The part was shit but customer service was fine. Obviously I never bought from him again. I don't even both price matching vendors here, I go with those I know and trust. If I go with a new place it'll be after heavy research on my part.

I sorta work in the business of international business registration.

Eerything has a paper trail and some form of record within the ministry of a host country. Even offshore.

Depending on the country, one could ask for a plathora of documents as proof that a business is legitimate... or at least that it exists in some legal form.

Setting aside the cost/benefit ratio (some documents, such as "certificates of status/good standing" cost money), a legitimate business owner will have a paper trail. This could be business utility bills, annual government payment fee recipets, memberships with other industries, bank letters acknowledging the existance of a business account (this is a universal one), personal refrences, business plans, business cards, websites, telephone-fax-email numbers... that work, advertisement, histrory of development projects, patent applications/licences.

hell, one time we had a client ask us to drive to the physical location of another business and take a picture to prove that something was actually there.

Your willingness to ask for any or all credentials are limitless as you are the contract provider

if my opinion means anything, in the best interest in the longevity of this site i would highly recomend that the administration establish high end "due dilligence" and "know your client (KYC)" protocols for their vendor relationships.


the following is a simple list of things one could ask without hesitation when establishing a business relationship:

1. contact information for at least one of the business principals, a scan copy of a driver's licence and personal utility bill would work.

2. any type of "business" has to have been registered with the local authority at some point. You have full right to request a scanned copy of the initial certificate of incorporation/formation/initially-filed-documents.

3. A bank letter addressed to "FT86 Club" stating that so and so has had a business account in the name of such and such for this long.

if someone doesn't have "2" and "3", then they're small fish working out of their home or backyard... could still be legitamate but i wouldn't go to someone like that for anything other than detailing work or one-of projects.

If they're not willing to provide "1" then then i would def raise flags.

Easiest way: proof that the company exists with the IRS. Every company will need an EIN and/or taxpayer ID if sole proprietorship.

A scanned copy of this (the actual # can be blocked out less last 4 digits) that can verify the business as being an entity would suffice. Any business operating legitimately would be able to produce this type of documentation as proof.

I'm not discussing the bad vendors that have been banned, or legit businesses turned bad. I'm specifically talking about those vendors that seem to sell things out of their house/apartment/whatever, that have no business selling in the first place because they were never a legitimate business to begin with.

Anyone can pay to be a sponsor and claim to operate a business. To actually own/have a SMB is another story. I'm just trying to see if some method can be done to verify sponsor's claimed business.

-alex

My expertise is in ecommerce (negotiation of vendor contracts, sales, MDF, etc) and a vendor agreement should include a clause that allows the site (FT86Club) to pursue legal action to recover any costs/damages if a vendor defrauds the site.

This should include clauses where the vendor has to prove that they are an operating business that is legal to make/buy/sell product in their local area. Resale permit, business permit, or even voided checks would be sufficient to meet this requirement.

The bar is very low and stupidly easy to meet. Any vendor wanting to sell on this site shouldn't have an issue meeting this obligation.

-alex

Not all vendors deal with the IRS as some are over seas.

Completely understand... and there are many, MANY ways to prove you are a legitimate company.

The point is, IRS is for the USA. There is some entity that serves the same function in Canada, Australia, Japan, etc etc.

How would a business pay tax on their sales? That's the easiest way to verify.

-alex

I think many people get more upset over poor customer service rather than if a business is registered with their local authority. This is where the iTrader feedback system on the site should be utilized by all buyers and vendors. I know it's not perfect and it can be hustled, but at the very least it provides some sort of flag that something is or isn't right with a vendor. I am in favor of looking for credentials, but moreover I am in favor of some sort of requirement to use the iTrader feedback system wherever possible understanding, of course, that enforcement might be tough and/or impractical.

and?


they still deal with their local authorities and you can still check into them.


the UK, for instance, has Companies House, it would cost me 1 GBP to look up the details of any corporation or limited organization. If I only want to check their date of incorporation, whether they paid their annual fee and whether they filed their annual report (taxes) for FREE.

I think the original post from me boils down to this:

What is the barrier to entry to being a vendor on this site? Is it just a matter of paying dues? Or should the business prove that they are a legitimate business?

It's not very hard to take a picture of a tax document showing who you are as a business, and if you don't want confidential information spread out you shouldn't be doing business in the first place.

I can't speak for other countries, but in the US if you are buying products from another vendor, usually there is a requirement for a W-9 form to be filled out for tax identification purposes. This is what allows a company like Amazon to start buying/stocking products to sell.

A W-9 is filled out even when contract work/1099 is performed. This isn't hard.

As for concerns about SSN: if one chooses to be sole proprietorship, their SSN is their effective tax ID number for IRS purposes. That is a choice the business owner makes. Those that don't want to be exposed will set up a different arrangement and be assigned a Federal EIN xx-xxxxxx

In any case, I think this is important to set up. I have a feeling there are a few "work from home" vendors that aren't licensed to sell products of any kind.

-alex

If vendors are selling parts, all suppliers already request all those documents before they can even purchase. You can't randomly just go to XYZ company to buy their products and sell for resale without the aforementioned documents.

Not true.

I can go contact someone in China right now, have them make me some replica products, and import it without ever registering a reseller's permit.

99% are legit. It's the 1% doing it out of their own garage and/or via a hookup that we should be aware of. I can go to my friend's shop right now and buy tons of items at jobber/WD/almost cost, and resell it without a proper license.

-alex

I think there are two conversation going here. What it takes to get a vendor account and business ethics.

I've had horrible customer service from companies big and small, I'm sure everyone has.

As far as ethics, its every consumers responsibility to verify who they are making a transaction with. There will always be scammers and fly by night companies, all you can do it do some research before you buy.

For checking business licenses, if someone is running an illegitimate business. Do you think that person would have a hard time faking a license? Im looking at the one hanging on my office wall and it would take 2 seconds to type out.