Who sets these boundaries? At the national level, the Federal Trade Commission does. At the local level, the state attorneys general, consumer-protection agencies, and district attorneys enforce the law. Regardless of who polices advertising, you need to avoid three serious mistakes:

• Making an advertising claim that is false or deceptive.

• Making a claim that is unsupported by evidence.

• Making a statement that is unfair, either to consumers or competitors.

If you slip up, according to the FTC, you could be facing:

Cease and desist orders. These legally-binding orders force companies to stop running the deceptive ad or practice, to prove claims in future ads, and to pay a fine of $16,000 per day per ad if you violate the law in the future.

Civil penalties, consumer redress and other monetary remedies. These range from as little as a few thousand dollars to millions of dollars, depending on the severity of the violation. You also might be ordered to give full or partial refunds to consumers who bought your product.

Corrective advertising, disclosures and other remedies. You might be compelled to take out new ads to correct the misinformation, to notify purchasers about deceptive claims in ads, or to include specific disclosures in future ads.

According to legal publisher Nolo, states regulate advertising through their consumer fraud or deceptive practices statutes. Violate these and you may be facing an injunction or legal action forcing you to pay restitution. In rare cases, you might even face criminal penalties. And don’t forget, if a consumer feels victimized by your advertising, he or she might sue you under your state’s consumer protection laws, either in small claims court or as part of a class action (many consumers banding together).

So don’t put your company finances or reputation at risk. Follow federal and state advertising rules, and if you’re not sure what they are, consult an attorney. According to Nolo, adhering to the following guidelines will keep you safe:

1. Play it straight. In other words, don’t make factually incorrect claims or misleading statements. If your company only produces, A, B, and C benefits, don’t claim it also delivers D, E, and F.

2. Get permission. If you use a person or organization’s words, picture, or endorsement, secure written permission first. Although U.S. copyright law allows for “fair use” of copyrighted works, the law in this area is complex. When in doubt, seek advice of counsel.

3. Compete fairly. No one likes a dirty competitor. If you run comparative advertising, verify that you are comparing apples to apples and that each point is accurate.

4. Check your stock. Generally state law requires merchants to have enough stock on hand to meet the demand that ensues from advertising. If you don’t, you should state in your add that “supplies are limited.” Also check to see if your state requires merchants to provide consumer rain checks when inventory is insufficient.

5. Be careful when you claim something is free. Never attach conditions to such a claim, which would actually impose a cost on the consumer. If there are other limits on the free claim, display them clearly in the ad.

6. Watch your language when describing sales and savings. Never doctor price comparisons so your price appears better than it is.

7. Be clear about your credit terms. Don’t offer easy credit unless you actually provide easy credit. If you provide terms, state all relevant information, including the down payment, repayment terms, and annual interest rate.

Finally, perhaps the best way to protect yourself is to re-frame how you think about advertising. Yes, it’s a great way to drum up business, and you want it to be as effective as possible. But also consider your advertising from the consumer perspective. When someone encounters dubious claims in an ad, they can only assume the entire firm has questionable ethics. Bottom line: Why come across as a fly-by-night firm just to make a sale. Advertise legally and ethically, and your reputation will thank you for it!