There are requirements that the employer has to demonstrate (i.e. they really do exists and they have the ability to pay the wage). Annual reports are typical as well as supplying the empoyer's tax ID. There are 'living room' shops, but a hired emplee on H1B has to work for the sponsoring employer, and not be contracted out. That's where the big abuses come from.
But the sponsoring employer can be the living room shop. Don't believe me? Well, I've met people who got their H1B this way. Believe me, it does happen.