Business Opportunity Plans

Generally, a business opportunity plan is an agreement in which a buyer pays a seller for the right to offer, sell, or distribute goods or services.

What is a business opportunity plan?

Ohio’s Business Opportunity Purchasers Protection Act (starting at ORC 1334.01) defines a business opportunity. For a plan to be a business opportunity, the buyer must be required to make an initial payment greater than $500 but less than $50,000. Additionally the goods or services must be supplied by the seller, by a third person authorized by the seller or by an affiliated person.

Also, to qualify as a business plan, the seller must make any one of the following representations:

• The purchaser will be provided with retail outlets, accounts, or help establishing them.
• The purchaser will be provided with locations (or help finding locations) for vending machines, rack displays, or similar equipment used for the distribution or sale of the goods or services.
• The purchase can earn a profit greater than the initial payment.
• There is a market for the goods or services.
• There is a buy-back arrangement.

What are the exemptions?

The Business Opportunity Purchasers Protection Act has 14 complete exemptions. For example, the law does not apply to the relationship between an employer and employee, the sale of an ongoing business, or previous purchasers of similar business plans. For the list of complete exemptions, see ORC 1334.12.

What disclosures are required in a business opportunity agreement?

Sellers of business opportunity plans must provide a written disclosure document 10 business days before the buyer purchases the plan. Required disclosures include: history of the company; identity and background of company officials; bankruptcy history; initial fees required for the purchase; and a description of the purchaser’s requirements. For additional required disclosures including specific language that may be required, see ORC 1334.02.

What actions are prohibited?

Sellers may not make false statements or misrepresentations about earnings, profits, or sales. They also may not accept a down payment of more than 20 percent of the total price before the goods or services are delivered. For more prohibited actions, see ORC 1334.03.

How much time do purchasers have to cancel?

The Business Opportunity Purchasers Protection Act gives purchasers five business days to cancel the agreement. Cancellations must be delivered in writing and postmarked by midnight of the fifth business day after the agreement is signed.

Do federal laws apply?

If a seller complies with the federal FTC Rule or the Uniform Franchise Offering Circular Guidelines adopted by the North American Securities Administrators Association, then the seller is considered to be in compliance with the Ohio Business Opportunity Purchasers Protection Act. Essentially, sellers who fully comply with the federal rules do not need to also comply with Ohio’s law.