Private businesses are harder to research than public companies. They are not required to report their financials and that information is closely guarded, but there are a number of places you can go to get a sense of their reputation, ethics and stability.
Companies in trouble tend to have more lawsuits, liens, consumer complaints and notices of trustee sales, which indicate a foreclosure is probable.
To jump start your digging on private companies, here are some research tips from veteran business reporter Betty Beard, who covers the economy for The Arizona Republic:
STEP 1: Understand the company’s structure
- There are four main types of companies you will most like run into – sole proprietorships, partnerships, corporations and limited liability corporations. You’ll need to understand the function of each and how to identify them correctly as Inc., LLC ect.
- Pay close attention to corporate structure as it is common for owners to put their operations under a number of corporations so that if one fails, the others can survive. Real-estate developers, for example, often put every subdivision under a separate LLC. You may need to draft a list of dozens of companies to understand the full picture of an operation.
STEP 2: Dig into corporation records and lawsuits
- Search the Secretary of State Office or state department where companies incorporate. Many companies also incorporate in Delaware because it is perceived as more business friendly and has a 200-year plus history of doing this. (Tip: Always search using the fewest letters you can, i.e. Matt Smith, instead of Matthew Smith, or just Sundt. That will give you all the possible filing names, i.e. Sundt Corp., Sundt Development, Sundt Corporation, or whatever else it may be filed under.)
- Federal lawsuits are filed in U.S. District Court and, fortunately, are fairly easy to find, no matter where in the U.S. These are usually cases in which parties are in different states, where one party is the federal government or where a federal law is involved as opposed to a state law. The source for information on federal cases and bankruptcies is PACER (Public Access to Court Electronic Records), It is available by subscription. If you are reporting on a bankruptcy, it’s important to distinguish between different types, Chapter 7, 11 and 13.
STEP 3: Use the Web to deep background companies and principals
- Don’t overlook the obvious. You can find out a lot about company by doing a Google search, researching its website or previous stories that have been written. Try a business-specific site such as Hoovers or Zoominfo. Source for researching the individual principals of a company is Pipl and Corporation Wiki. Larger companies often have press contacts.
- If your news organization has a subscription to Lexis Nexis, it’s a great source of information. It offers a variety of newspaper and magazine articles as well as public records from around the country. To learn more about how to use Nexis, you can arrange for training at your desk or in a group conference call. Call the Nexis customer service at 800-543-6862. The Nexis site also offers a self-guided tutorial.
- Some websites allow consumers to vent or post reviews, and they can give you a general sense of a company’s reputation. They include Yelp and Ripoff Report, Keep in mind that they may include false reviews or complaints that have been resolved.
- If a website has been shut down, you can probably still access it by going to the Wayback Machine, which saves cached pages.
- Find information on a website’s owners: one source is Network Solutions, another is Whois. This is a good way to find out who owns a domain name and to track owners of home-based businesses.
STEP 4: Round out your research with these other sources
- Stop by the Better Business Bureau and check to see if the company you are researching has complaints. (Note: Just because a company has an A+ rating with the BBB, don’t assume it’s void of shady practices.)
- Visit state and local regulatory agencies, including those that regulate real estate agents, contractors, restaurants, liquor licenses, and lawyers.
- BizBuySell is like a Craigslist for mom-and-pop businesses, and some larger firms. You can narrow your search to a state, type of business and asking price.
- Construction accidents/inspections: The U.S. Office of Safety and Health Administration tracks inspections, accidents, violations and fines.
- Municipal business license departments: Cities and towns often keep track of business licenses and taxes using something like a Business License Department or License and Tax Department. Sometimes the information is protected by privacy laws.
- Sales taxes: You can submit a records request to cities and towns for sales tax totals for any range of dates in a general geographic area or for a general category of business, but cities will not release the totals for a specific business to protect its privacy.
- Many businesses are hired by cities to perform services through a bid process, some businesses create leases and agreements to rent city properties and some businesses build projects or retain jobs with the incentive of city money or reimbursement. All these are set down in legal documents that are public under state records laws.
- Nonprofits, such as hospitals and chambers of commerce can be researched at Guidestar. You will need to register. To get financial information, look for the Form 990s. They are IRS returns for companies exempt from income tax. The information can be out of date, though. You can also contact a non-profit directly and ask for its latest Form 990.
- Discrimination cases. For press releases about past actions taken in connection with U.S. Equal Employment Opportunity Commission, check www.EEOC.gov and enter a company name in the search area.
- Industry trade groups/associations may be useful if you want an analyst to comment on a field or firm.