Opinions expressed by Entrepreneur contributors are their own.

Beware of strangers wanting to invest in your business. If the offer sounds too good to be true, it probably is, says James B. Hunt, national practice leader of investigative services for accounting firm Price Waterhouse LLP in Los Angeles.

Hunt cites two common scams entrepreneurs often fall prey to. In the first, called "bankruptcy bust-out," someone offers to buy your company using the note payable method, in which you hold a promissory note secured by common stock in the company. "The new owner abuses all the creditor relationships and runs credit and supplier accounts up to the limit," says Hunt. "They also clean out the cash in the company by paying out bonuses or advances to stockholders and shipping all inventory out of state to sell and convert into cash."

This is a subscriber-only article. Join Entrepreneur+today for access

Editor's Pick

Related Topics

Business News

'No Question, We Probably Went Too Far': Delta Airlines CEO Backtracks on Sweeping Changes to SkyMiles Accounts, Sky Club Access

The unpopular changes set to roll out in 2025 were announced earlier this month.

Business News

Jeff Bezos Lost $5 Billion in 1 Day After Amazon FTC Lawsuit News

The lawsuit accuses Amazon of engaging in anticompetitive practices, which has led to a sharp decline in the company's stock value and a substantial reduction in Bezos's net worth.

Business News

Why Barbara Corcoran Chose Her Business Partner After Looking Inside Her Purse: 'Best Hire I Ever Made'

Esther Kaplan served as President of the Corcoran Group until 2000.

Business News

凯蒂Perry Is Fighting the Founder of 1-800-Flowers for a $15 Million California Mansion He Doesn't Want to Sell Her

The eight-bedroom, 11-bathroom estate sits on nearly nine acres in the Santa Ynez foothills in Montecito.

Growing a Business

Want to Sound Smarter? This Stanford Professor's Simple 3-Point Technique Will Help

With a little structure, you can impress audiences with your ad-libbing all day.