Identity theft is one of the most common crimes on the planet and often shows up on news headlines. It mostly happens to individuals, but it can also happen to businesses.
Business identity theft is a significant threat, especially to small and mid-sized businesses (SMBs). Freelancers and independent contractors who offer their services as limited liability companies (LLCs) are at the highest risk of business identity theft.
Identity theft is a federal crime with severe penalties. Business identity thieves will often pose as business owners, officers, or employees taking out loans, withdrawing cash, or using credit lines, leaving the businesses burdened by severe debts.
Identity thieves can also make fraudulent payments to employees as wages. They will use a paystub generator to create fake pay stubs but instead direct the funds to their accounts.
The thieves will quickly withdraw the funds and escape leaving the businesses in serious trouble with banks and other creditors or suppliers. They will typically use a business's federal tax ID or employer identification number to access funds.
Suppose a criminal can change the business registration details to appear as the president or secretary of the company. In that case, they can get access to the business's bank accounts and withdraw funds or make fraudulent purchases.
An identity thief can close or dissolve an LLC on the state authority's website. There is a window that usually lasts several years where they can reopen the LLC. It will give them control of the company, at which point they can do whatever they want with it.
Identity thieves sometimes change the address of the owners of an LLC on the company's registration details. They can hence receive sensitive information about the company without the knowledge of the company owners. They will perform many fraudulent activities with the data from which they profit.
The following are some ways through which you can prevent business identity theft:
The fact of the matter is that digital information is more secure than physical files. Moreover, it takes a more intelligent criminal to hack a database than break in and access physical files.
Therefore, turn as many of your files as possible into digital form. You should especially avoid storing sensitive information such as banking information in physical form. If you have to use any physical files or documents, ensure you shred them and properly dispose of the data.
When you do go digital, it does not mean you are protected. You should take the necessary steps to protect all your data, especially that you will be transmitting over the internet. As a freelancer, you are probably doing a lot of work online, which puts your information at risk.
Install antiviruses on all company computers, install firewalls on websites, encrypt your data and get secure servers to store your information. Cybersecurity is the best line of defense against business identity theft.
If you don't want your business identity stolen or at least to notice it as soon as it happens, you had better keep a close eye on your bank accounts and credit. Eternal vigilance is the best defense against business identity theft.
Get a monitoring service to watch the activity on your bank accounts and changes to your credit information. You will receive notification of every transaction and will notice as soon as anything goes amiss.
Your employees are the main risk as it pertains to business identity theft. If identity thieves can trick them into sharing information, your business will be vulnerable.
Educate your employees on how to notice signs of identity theft and how to report them immediately. If they do, you should be well protected.
Business identity theft is becoming more common as more business occurs digitally. The above are some of the leading identity theft risks you can experience and some ways to prevent it from happening. Remember to always be vigilant, as one mistake is all it takes to compromise your business.
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