A disclosure agreement is a legal contract between at least two parties that outlines materials or knowledge that parties wish to share with one another for business purposes and desire to restrict access to. It is an important legal document established by the government in 1979. The document provides protection to perspective buyers.

The FTB Rule has been in effect since the latter part of 1979. This has had a large impact on all business opportunities. The rule is designed to assure all prospective buyers that they’ll receive a full disclosure containing the type of background information needed to make an informed decision.

There are still those sellers who seek every possible means to escape this regulation. This is controlled at the state level and is considered fraud if caught. If the seller does get away without issuing the FTB 4925, the new buyer should expect major problems ahead.

The licensor has the obligation to state any financial arrangements. The disclosure must state what the parent company will provide in terms of equipment, training, services and manuals. If the licensee has to purchase any materials from a supplier that must be stated.

Another consideration to the seller, the buyer must receive the FTC disclosure statement 10 days prior to paying any money. The 10 business day requirement (either way) is minimal. If you haven’t received an FTC disclosure document, don’t sign anything or pay out any money, even if claims are made that are “refundable.”

In addition, most states include information stating that the buyer has three to seven days referred to as a “cooling off” period so he can reconsider the situation after all of the commotion. The government is aware of the selling pitches from many slick salespeople. Since this is a big decision and a large amount of money involved, time is very valuable.

If there are any questions regarding the history of the company you are planning to purchase, ask. The history of the parent company needs to be detailed. It should include the identity and business experience of any persons affiliated.

Ask the salesperson, seller or representative for the phone contact of the local state agency or FTC office that has advised them of the exempt status. The only reasons for an exemption are those where the total initial payment is less than $500. The other possibility is when payment is made for inventory sold at bona fide wholesale price.