You should keep the old adage, "If it sounds too good to be true, it probably is," in mind when evaluating business opportunities. There is no single source that can assure you that a business opportunity is legitimate. To determine if the business opportunity is legitimate, you must perform "due diligence." Entrepreneur.com defines due diligence, in part, as a "reasonable investigation of a proposed investment deal and of the principals offering it before the transaction is finalized to check out an investment's worthiness."

Who does the investigation? You can do a great deal of it yourself. It is also a wise idea to get professional advice from your attorney and accountant as well as a trusted business mentor. All of these people will help you make sure you ask the right questions and go to the right locations to get the information you need.

What information do you want to gather? Some places to start are with your state's attorney general and/or the office overseeing consumer protection plus your local Better Business Bureau. You also should ask for references from the company. However, be careful that the names you are given represent a broad spectrum of both clients, suppliers, and employees if there are any. You also will want to examine the legal structure of the business and its financial records and tax returns for the last three to five years. Remember that the only material you should consider is what the provider of the opportunity is willing to put in writing.

More information about how to avoid problems when evaluating business opportunities can be found by contacting your local county Cooperative Extension office and from various federal agencies such as the Small Business Administration, Federal Trade Commission, U.S. Postal Service, and the Securities and Exchange Commission.