Many so-called publishing firms exist on the edges of legality. They are NOT illegal. They follow the letter of the law. Because they know what they want better than you do, they can craft written agreements that are binding contracts, under law. You have little or no protection from their terms once you have signed the document.
Subsidy publishing. Once a perfectly legitimate way to publish scholarly works, today subsidy publishing too often means that you, the author, subsidize (pay for) all production costs, bear all the financial risk, and give your profits to the company that accepts your fees.
Vanity publishing. The term, "vanity publishing," is just another way to describe a system that takes your money and guarantees nothing. It is not uncommon to pay a vanity press $5,000 and receive only a handful of books, the "privilege" of buying additional books at a "discount" of 25% to 40%, and a written agreement that strips you of all rights of ownership to the words you have written! You can't even re-publish your own book.
Publishing partners. Clever operators will sometimes use business terms such as "publishing partners" to make you think they will do more for you than they will. They may suggest that if you will assume some of the financial risk, they'll sell your book and you will both prosper. Watch out! Pay for the services you need but don't assume a partnership exists when you are the one paying the fees.
Overseas opportunities. Shielded by international boundaries, some unscrupulous individuals get by offering to take your book to India, Hong Kong, France, Germany or even the UK when all they take is the fees you pay. It's harder to check out the credentials of a business in another country, but if you belong to a professional publishing association such as PMA you can find out if enticing offers from overseas have any merit. Usually they don't.
Flashing red lights: When you see any of the following, run the other way...
"We'll write your best-selling novel for you in three weeks."
"We'll sell your book for you"
"We edit for $1 a page"
"We'll take care of your ISBN and other legal details for you"
"We'll print your book in 24 hours for $1 a book"
"Use our stunning templates for your book covers"
Next pitfall: Dreaming from the numbers