CHAPTER 8. BUSINESS OPPORTUNITY TRANSACTIONS
IC 24-5-8
Chapter 8. Business Opportunity Transactions
IC 24-5-8-1
Definitions
Sec. 1. As used in this chapter:
"Business opportunity" means an investment that:
(1) involves the sale or lease or offer to sell or lease any goodsor services to an investor that are to be used by the investor inbeginning or operating a business;
(2) involves an initial payment by the investor of more than fivehundred dollars ($500) and an initial cash payment of less thanfifty thousand dollars ($50,000); and
(3) involves a solicitation of investors in which the sellerrepresents that:
(A) the investor may or will earn an amount in excess of theinitial payment as a result of the investment;
(B) a market exists for any goods to be made or services tobe rendered by the investor;
(C) the seller may buy from the investor any goods to bemade or services to be rendered by the investor;
(D) the seller or a person referred by the seller to theinvestor may or will sell, lease, or distribute the goods madeor services rendered by the investor; or
(E) the seller may or will pay to the investor the differencebetween the initial payment and the investor's earnings fromthe investment.
"Business opportunity" does not include an investment thatinvolves:
(1) the sale of a franchise as defined by IC 23-2-2.5-1 orIC 23-2-2.7-5;
(2) the sale of any assets (other than inventory) of an ongoingbusiness by the owner of the business;
(3) the not-for-profit sale of sales demonstration equipment,materials, or samples for a total price of five hundred dollars($500) or less; or
(4) the sale of all or substantially all of the assets of an ongoingbusiness.
"Contract" means any agreement relating to a businessopportunity.
"Goods" means any merchandise, equipment, product, supply, ormaterial.
"Initial cash payment" means that portion of the initial paymentthat the investor is obligated to pay to the seller before or at the timeof delivery of goods or services. The term does not include anyamount financed by the seller, any amount for which financing is tobe obtained by the seller, any amount that the seller assists infinancing, or any amount required by the seller to be deposited assecurity for the performance by an investor of the operation of thebusiness or that secures an extension of credit. "Initial payment" means the total amount an investor is obligatedto pay under the terms of the contract before or at the time ofdelivery of the goods or services to the investor or within six (6)months of the date that the investor commences operation of thebusiness. If the contract states a total price for the businessopportunity and provides that the total price is to be paid partially asan initial cash payment and the remainder in specific monthlypayments, the term means the total price. The term does not includeany amount required by the seller to be deposited as security for theperformance by an investor of the operation of the business or thatsecures an extension of credit.
"Investor" means a person who is solicited to become obligated ordoes become obligated on a contract.
"Offer" includes every attempt to dispose of a businessopportunity or an interest in a business opportunity for value.
"Person" means a human being, corporation, limited liabilitycompany, partnership, unincorporated association, trust, orgovernmental entity.
"Sale" includes every contract to sell or dispose of a businessopportunity or an interest in a business opportunity for value.
"Seller" means a person, or his agent, who sells or leases or offersto sell or lease a business opportunity.
"Service" means any assistance, guidance, direction, work, labor,or such other act as may be provided by the seller in the initiation ormaintenance of a business.
"Substantial seller" means a seller who has a net worth on aconsolidated basis, according to current financial statements certifiedby an independent certified public accountant, of:
(1) at least five million dollars ($5,000,000); or
(2) at least one million dollars ($1,000,000) if the seller is atleast eighty percent (80%) owned by a corporation that has a networth on a consolidated basis, according to current financialstatements certified by an independent certified publicaccountant, of at least five million dollars ($5,000,000).
As added by P.L.134-1984, SEC.1. Amended by P.L.239-1985,SEC.2; P.L.12-1986, SEC.10; P.L.252-1987, SEC.1; P.L.8-1993,SEC.361.
IC 24-5-8-1.5
Substantial sellers; application of certain sections
Sec. 1.5. Sections 2, 3, 4, 13, 15, and 19 of this chapter do notapply to a substantial seller.
As added by P.L.252-1987, SEC.2.
IC 24-5-8-2
Disclosure document; cover sheet; contents
Sec. 2. (a) At least seventy-two (72) hours before the time theinvestor signs a contract, or at least seventy-two (72) hours beforereceipt of any consideration by the seller, whichever occurs first, theseller shall provide the investor a written disclosure document, the
cover sheet of which is entitled in at least ten (10) point bold facecapital letters "DISCLOSURES REQUIRED BY INDIANA LAW".Under this title, the following statement must appear in at least ten(10) point type: "The state of Indiana has not reviewed and does notapprove, recommend, endorse, or sponsor any business opportunity.The information contained in this disclosure has not been verified bythe state. If you have any questions about this investment, see anattorney before you sign a contract.". Nothing except the title andstatement may appear on the cover sheet.
(b) The disclosure document must also contain the followinginformation:
(1) The name of the seller, whether the seller is doing businessas an individual, partnership, limited liability company, orcorporation, the names under which the seller has done, isdoing, or intends to do business, and the name of any parent oraffiliated company that will engage in business transactionswith the investor or that will take responsibility for statementsmade by the seller.
(2) The names, business addresses, business telephone numbers,and titles of the seller's officers, directors, trustees, generalpartners, general managers, principal executives, and any otherpersons charged with responsibility for the seller's businessactivities relating to the sale of business opportunities.
(3) The names, business addresses, and business telephonenumbers of all the seller's representatives who are solicitingbusiness opportunities in Indiana.
(4) The length of time the seller has:
(A) solicited business opportunities; and
(B) solicited business opportunities involving the goods orservices currently being offered to the investor.
(5) A statement of the initial payment to be paid by the investor,or when not known, a statement of the approximate initialpayment to be paid.
(6) An unexecuted copy of all contracts.
(7) The following financial statements:
(A) A balance sheet of the seller as of the close of its lastfiscal year.
(B) Income statements for each of the seller's last three (3)fiscal years or for the period of the seller's and anypredecessor's existence, if the seller and any predecessorhave been in existence for less than three (3) years.
(8) A complete and detailed description of any service that theseller undertakes to perform for the investor.
(9) A complete description of any training offered by the seller,the length of training, and a detailed itemization of all costs tobe covered by any fee to be charged for the training.
(10) A statement disclosing the names, home addresses, andhome telephone numbers of all persons who have been investorsin a business opportunity offered by the seller within the lasttwo (2) year period. (11) A statement listing the name, home address, and hometelephone number of any investor who has requested within thepreceding three (3) year period that the seller return his money.
(12) A statement as to whether the seller or any of its officers,directors, trustees, general partners, general managers, principalexecutives, or representatives has been:
(A) held liable in a civil action for unfair, false, misleading,or deceptive practices;
(B) convicted of a crime involving fraud, embezzlement,conversion, or theft during the most recent seven (7) yearperiod; or
(C) declared bankrupt in any judicial proceeding during themost recent seven (7) year period.
(13) A statement as to whether the seller or any of its officers,directors, trustees, general partners, general managers, principalexecutives, or representatives has been a party to any legalcause of action brought by an investor within the most recentseven (7) year period.
(14) A statement as to whether the seller or any of its officers,directors, trustees, general partners, general managers, principalexecutives, or representatives is currently involved in litigationalleging unfair, false, misleading, or deceptive practices.
(15) A statement containing the name of the parties, the nameof the court, the cause or docket number of the lawsuit, the datethe suit was filed, and the date the judgment was entered, ifapplicable, for each answer to subdivisions (12), (13), and (14).
(16) The following statement: "As required by Indiana law, theseller has secured a bond issued by _______________ (nameand address of surety), a surety company authorized to dobusiness in Indiana. Before signing a contract to invest in thisbusiness opportunity, you should check with the suretycompany to determine the bond's current status.".
(17) If the seller makes any statement concerning earnings orrange of earnings that may be earned through the businessopportunity, the seller must set forth the following:
"No guarantee of earnings or ranges of earnings can bemade. The number of investors who have earned throughthis business opportunity an amount in excess of the amountof their initial payment is at least ________, whichrepresents ________ percent of the total number of investorsin this business opportunity.".
As added by P.L.134-1984, SEC.1. Amended by P.L.8-1993,SEC.362.
IC 24-5-8-3
Surety bonds; requirements; waiver
Sec. 3. (a) A seller shall obtain a surety bond issued by a suretycompany authorized to do business in Indiana. The amount of thebond must be at least twenty (20) times the initial payment requiredfor the business opportunity, but not less than seventy-five thousand
dollars ($75,000). The bond must be in favor of the state for the useand benefit of investors.
(b) The attorney general may waive the bonding requirementunder subsection (a) and accept in lieu of the bond an irrevocableletter of credit for an equivalent amount issued in the favor of thestate.
As added by P.L.134-1984, SEC.1. Amended by P.L.12-1986,SEC.11.
IC 24-5-8-4
Requirements before advertising; amendment of filings; renewalfee; record of filings
Sec. 4. (a) Before placing any advertisement or making any otherrepresentations to any investor in Indiana, the seller shall:
(1) file a copy of the disclosure statement required by section 2of this chapter and the bond required by section 3 of thischapter with the consumer protection division of the office ofthe attorney general; and
(2) pay an initial filing fee of fifty dollars ($50).
(b) The seller shall amend these filings when any material changein the information occurs and shall pay a fee of ten dollars ($10) forfiling the amendment.
(c) If the seller continues to solicit business opportunities inIndiana, he shall pay annually a renewal fee of ten dollars ($10) onor before the anniversary date of the initial filing for the particularbusiness opportunity.
(d) The director of the consumer protection division of the officeof the attorney general or his designate shall maintain a record of allfilings made under this chapter and shall assign a registration numberto each of them. The seller shall be advised in writing of the assignednumber. Any advertisements, pamphlets, brochures, or any othermaterials used in the solicitation of a business opportunity mustinclude the assigned registration number in the following manner:"C.P.D. Reg. No. ____ .".
As added by P.L.134-1984, SEC.1.
IC 24-5-8-5
Representations of business opportunity; copy to investor, contents
Sec. 5. (a) If the seller represents that the business opportunityprovides earning potential of any kind, the seller shall have data tosubstantiate the claims of earning potential and shall give to theinvestor at the first in person communication by the seller a copy ofthis data or a copy of any statement of estimated or projected earningpotential prepared for presentation to prospective investors, togetherwith an explanation of the statement. A mathematical computationof the number of sales multiplied by the amount of profit per sale toreach a projected earnings figure is not sufficient data to substantiatean earnings potential claim for the purposes of this section.
(b) The earning potential data given to the investor by a seller,except a substantial seller, must disclose: (1) the length of time the seller has been soliciting the particularbusiness opportunity;
(2) the number of investors in the particular businessopportunity that were solicited by the seller and known to theseller to have made at least the same sales, earnings, or profitsas those represented;
(3) the percentage the number in subdivision (2) represents ofthe total number of investors in the particular businessopportunity that were solicited by the seller; and
(4) the current address of any person named by the seller ashaving profited from the particular business opportunity, adescription of the circumstances under which the profit wasearned, and a description of any interest held by the namedperson in the business opportunity being offered to the investor.
As added by P.L.134-1984, SEC.1. Amended by P.L.252-1987,SEC.3.
IC 24-5-8-6
Contracts; contents
Sec. 6. (a) The seller shall put every contract in writing and shallgive the investor a copy of the contract at the time the investor signsthe contract.
(b) The seller shall include in every contract the following:
(1) The seller's business address and the name and businessaddress of the seller's agent in this state authorized to receiveservice of process.
(2) The terms and conditions of payment.
(3) A detailed description of any services that the sellerundertakes to perform for the investor.
(4) A detailed description of any training that the sellerundertakes to provide to the investor.
(5) The approximate delivery date of any goods the seller is todeliver to the investor.
(6) A statement of the investor's right to cancel that must:
(A) appear under the conspicuous caption, "INVESTOR'SRIGHT TO CANCEL WITHIN 30 DAYS"; and
(B) contain the following statement in no smaller type thanthe body portion of the contract: "THE INVESTOR IN THISBUSINESS OPPORTUNITY HAS THE RIGHT TOCANCEL THIS CONTRACT FOR ANY REASON ATANY TIME BEFORE MIDNIGHT OF THE 30THCALENDAR DAY AFTER THIS CONTRACT ISENTERED INTO. YOU MAY CANCEL THISCONTRACT BY MAILING A NOTICE THAT YOU DONOT WANT THE BUSINESS OPPORTUNITY TO THESELLER BEFORE __________, 20__ AT 12:00MIDNIGHT AT _______________.".
(c) Subsection (b)(6) does not apply to a contract entered into bya substantial seller, unless required by the consumer protectiondivision of the office of the attorney general for good cause shown
after notice.
As added by P.L.134-1984, SEC.1. Amended by P.L.252-1987,SEC.4; P.L.2-2005, SEC.62.
IC 24-5-8-7
Books, records, and accounts; documents
Sec. 7. (a) Every seller shall keep and maintain a complete set ofbooks, records, and accounts of business opportunity transactionsmade by the seller.
(b) The seller shall keep all documents relating to each contractentered into by the seller for four (4) years after the date of thecontract.
As added by P.L.134-1984, SEC.1.
IC 24-5-8-8
Validity of waiver of provisions by investor
Sec. 8. Any waiver by an investor of the provisions of this chapteris deemed contrary to public policy and is void and unenforceable.
As added by P.L.134-1984, SEC.1.
IC 24-5-8-9
Attempts to have investor waive rights
Sec. 9. A seller may not attempt to have an investor waive rightsgiven to the investor by this chapter.
As added by P.L.134-1984, SEC.1.
IC 24-5-8-10
Cutting off right or defense of investor against seller
Sec. 10. A seller may not require the investor to execute any notethat will cut off a right or defense that the investor or a third partymay have against the seller.
As added by P.L.134-1984, SEC.1.
IC 24-5-8-11
Initial cash payment
Sec. 11. A seller may not require an initial cash payment thatexceeds twenty percent (20%) of the initial payment.
As added by P.L.134-1984, SEC.1.
IC 24-5-8-12
Escrow accounts
Sec. 12. A seller may not require a payment before the delivery ofany goods that exceeds twenty percent (20%) of the initial paymentunless the amount in excess of the twenty percent (20%) payment isplaced in an escrow account which provides that the money can notbe released until:
(1) the investor notifies the escrow agent in writing of thereceipt of the goods; or
(2) the seller presents to the escrow agent a bill of lading thatproves shipment of the goods as required by the contract.Notification of receipt by the investor to the escrow agent may not beunreasonably withheld.
As added by P.L.134-1984, SEC.1.
IC 24-5-8-13
Reference to compliance with chapter in advertisement
Sec. 13. A seller may not make any reference to its compliancewith this chapter in any advertisement or other contact with aninvestor other than by setting forth the registration number asprovided in section 4 of this chapter.
As added by P.L.134-1984, SEC.1.
IC 24-5-8-14
Use of commercial symbols
Sec. 14. A seller may not use the trademark, service mark, tradename, logotype, advertising, or other commercial symbol of anybusiness that does not either control the ownership interest in theseller or accept responsibility for all representations made by theseller in regard to the business opportunity, unless it is clear from thecircumstances that the owner of the commercial symbol is notinvolved in the business opportunity.
As added by P.L.134-1984, SEC.1.
IC 24-5-8-15
Cancellation of contract for seller's failure to comply
Sec. 15. If a seller fails to comply with section 2 of this chapter,the investor may cancel any contract by notifying the seller in anymanner.
As added by P.L.134-1984, SEC.1.
IC 24-5-8-16
Voiding contracts
Sec. 16. (a) If a seller:
(1) uses any untrue, misleading, or deceptive statements in abusiness opportunity transaction;
(2) fails to deliver the goods or services necessary to beginsubstantial operation of the business within forty-five (45) daysof the delivery date stated in the contract; or
(3) fails to comply with section 6 of this chapter;
the investor may void the contract within one (1) year of the date ofthe contract by giving written notice to the seller and is entitled to areturn from the seller of all consideration paid to the seller.
(b) Upon receipt by the investor of the consideration paid to theseller, the investor shall make available to the seller, at a reasonabletime and place, the goods received by the investor. However, theinvestor is not entitled to unjust enrichment by exercising the rightsprovided by this section.
As added by P.L.134-1984, SEC.1.
IC 24-5-8-17 Recovery of actual damages for seller's failure to comply withchapter or breach of contract
Sec. 17. Notwithstanding any other section of this chapter, aperson who is damaged by a seller's failure to comply with thischapter or by a seller's breach of a contract may:
(1) bring an action for recovery of his actual damage includingattorney fees; and
(2) bring an action against the bond required by section 3 of thischapter;
to recover an amount equal to his actual damages. However, theliability of the seller under this section may not exceed the amountof the bond.
As added by P.L.134-1984, SEC.1.
IC 24-5-8-18
Injunction
Sec. 18. Upon complaint by any person that a seller has failed tocomply with this chapter, the circuit or superior court of the countyof residence of the complainant may enjoin the seller from furtherviolations.
As added by P.L.134-1984, SEC.1.
IC 24-5-8-19
Failure to comply; Class D felony
Sec. 19. A person who fails to comply with section 4 of thischapter commits a Class D felony.
As added by P.L.134-1984, SEC.1.
IC 24-5-8-20
Failure to comply; deceptive act
Sec. 20. A person who fails to comply with any provision of thischapter commits a deceptive act that is actionable by the attorneygeneral under IC 24-5-0.5-4(c) and is subject to the penaltiesenumerated in IC 24-5-0.5.
As added by P.L.134-1984, SEC.1.
IC 24-5-8-21
Construction
Sec. 21. Nothing in this chapter shall be construed as relieving aperson from complying with IC 23-2-2.5, IC 23-2-2.7, and IC 23-19.
As added by P.L.134-1984, SEC.1. Amended by P.L.27-2007,SEC.24.