How do I check if a contractor's business is real?

"Is this business real?" is the most fundamental verification question. A contractor operating without a legally formed business entity (LLC, corporation, sole proprietorship with proper DBA) is operating illegally in most states and represents either a casual sole proprietor or a fraudulent operator.

The five legal business forms in the US:

1. LLC (Limited Liability Company). Most common for contractors. Registered at the state Secretary of State. Member-managed or manager-managed. Members have limited liability.

2. Corporation (S-corp, C-corp). Registered at the state Secretary of State. Shareholders have limited liability.

3. Sole Proprietorship. The individual operates personally. May or may not have a DBA (Doing Business As) filing. No separate legal entity.

4. Partnership (GP, LP, LLP). Two or more parties. May or may not be registered depending on state.

5. Nonprofit or Cooperative. Rare for contractors.

How to verify:

Step 1: Identify the legal entity name.

- Look at the contractor's quote or contract. The entity name appears in the signature block, on the letterhead, and on any business cards or marketing material. - The legal name may differ from the trade name. "Garcia Construction" may legally be "Garcia Construction LLC" or "MGM Holdings LLC dba Garcia Construction."

Step 2: Search the Secretary of State.

- Every state has a free online business entity search. Examples: - California: bizfileonline.sos.ca.gov - Texas: mycpa.cpa.state.tx.us/coa - Florida: sunbiz.org - New York: appext20.dos.ny.gov/corp_public - Illinois: ilsos.gov/corporatellc - Each state has its own portal. - Search by exact entity name. If no exact match, search by partial name or by registered agent name.

Step 3: Verify entity details.

- Status: Active, Good Standing, or equivalent (varies by state). - Formation date: the longer ago, the more verifiable. Less than 12 months = elevated risk. - Registered agent: a real person or company with an in-state address authorized to receive legal service. - Principal office address: where the business operates. - Officers/members: who runs the entity.

Step 4: Cross-check against the contract and license.

- Business name on the contract should exactly match the Secretary of State entity name. - Business name on the contractor's license should exactly match (or be an authorized DBA). - Owner's personal name should match the qualifying party on the license and an officer/member of the LLC.

Red flags:

1. No Secretary of State match. The business does not legally exist. This is a hard stop.

2. Recently dissolved entity. The contractor is operating under a dissolved or inactive entity. May be administrative oversight (back-filing required) or may indicate intentional phoenix activity.

3. Multiple LLCs at the same address. Phoenix-company signature. Search by registered agent or by address to find clustered entities.

4. P.O. box address. Most states require a physical in-state address for the principal office. P.O. box = the business has no real presence in the state.

5. Out-of-state entity with no in-state foreign registration. The contractor formed an LLC in another state and is operating in your state without registering as a foreign entity. Often a fraud signature.

6. Registered agent that is a virtual mail service or commercial registered agent at a generic address (Northwest Registered Agent, LegalZoom Registered Agent). Not inherently fraud, but limits accountability.

7. Officers who appear in multiple unrelated entities. Cross-search by officer name; a sole individual operating 5+ LLCs in the construction trade is worth scrutiny.

8. Sole proprietor with no DBA filing. The contractor is operating under a trade name but never filed the required DBA. Technically illegal in most states.

How sole proprietorships verify:

- Sole proprietors don't register with the Secretary of State in the same way. - They may have a DBA filing at the county clerk or state level. - Their personal name is the legal name; any other name requires a DBA. - They operate under the qualifier's individual tax ID (SSN) or an EIN. - Verification leans more heavily on individual licensing (state contractor license), court records by personal name, and references.

Groundcheck (earthmove.io/trust) automatically checks the Secretary of State in all 51 jurisdictions and cross-references against the license-board entity name. A mismatch generates an explicit flag. The phoenix-detection check also runs an address and registered-agent cross-reference to identify entity clustering.