Do you know of any free government Web sites that offer the option to validate a company before they would be added to a vendor master file?

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Generally, the secretaries of state will have information about companies that are incorporated in their states and whether the companies are active and in compliance with their statutory filing laws. For instance, in the state of Georgia, the Web site for the secretary of state has a menu labeled Corporations and within this menu is an area to check on the registration of a company incorporated in Georgia. This free search only tells you that a company is in fact incorporated in the state and that they are in compliance with the filing requirements. It does not give you credit history, complaints filed by customers, etc. Some of these services are generally fee-based and are offered by companies such as Dun & Bradstreet and the Better Business Bureau.

We are unaware of a requirement by any external statutory agency, such as the IRS, state or federal law, to check a business's licenses prior to adding it to your vendor master file or doing business with them. There may be a circumstance if a contract with one of your customers requires your vendor subcontractors to have a license then you should comply (for instance if you have a contract with a governmental agency that requires your subcontractors to have a license).

It is, however, best practice to conduct vendor verification/validation, which typically includes checking with the secretary of state in the business' state of incorporation, among other checks.

For additional validation steps, see Vendor Due Diligence: Verifying New Vendor Legitimacy, under AP Research --> Vendor Master File.

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