Are Multi-Level Marketing Companies Legitimate?
Updated on: by Erica Martin
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If you don’t mind investing a little money and time, one way you can earn money from home is by working as an independent distributor for a multi-level marketing (MLM) company. Though I personally haven’t done this, I do realize that the opportunity is out there. I also realize that there are pyramid schemes that try to make themselves look like legitimate multi-level marketing companies, however – this post will provide information on how to distinguish a legitimate MLM opportunity from a pyramid scheme.
What is multi-level marketing?
Multi-level marketing is a marketing structure where the sales people are rewarded not only for their personal sales, but also for the sales of people they personally recruit into the company – these people are referred to as their downline. Multi-level marketing is also called network marketing and referral marketing, and it has often been criticized because the structure is similar to many pyramid schemes, which are illegal.
How can I tell if a multi-level marketing opportunity is legitimate?
According to the Federal Trade Commission, if the money you make is based primarily on the number of distributors you recruit, and your sales to them, rather than on your sales to outside people who plan to use the products, it’s probably a pyramid scheme. The best way to tell if a multi-level marketing company is legitimate is to do your research, however. The FTC provides eight steps you should follow when evaluating a multi-level marketing opportunity:
- Find and study the company’s track record.
- Learn about the product
- Ask questions.
- Understand restrictions
- Talk to other distributors.
- Consider using a friend or adviser as a neutral sounding board or for a gut check.
- Take your time – don’t let anyone rush you into making a decision.
- Think about whether the plan suits your talents and goals.
What are some examples of legitimate multi-level marketing companies?
There are several examples of legitimate multi-level marketing companies, and many of them are companies you may already be familiar with. They include:
If you have the time and financial resources, multi-level marketing can be a great way to earn money from home. And since you’re an independent sales person or distributor, you can deduct your business expenses on your taxes. Just be sure to do your research using the 8 steps outlined above, as well as the resources that are available online.
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