Are Multi-Level Marketing Companies Legitimate?

Updated on: by Erica Martin

MLM scams

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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:

  1. Find and study the company’s track record.
  2. Learn about the product
  3. Ask questions.
  4. Understand restrictions
  5. Talk to other distributors.
  6. Consider using a friend or adviser as a neutral sounding board or for a gut check.
  7. Take your time – don’t let anyone rush you into making a decision.
  8. 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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Patti Hale

December 16, 2013 at 7:12 pm

Thanks for this! I see so many offers for MLM on Google+ that look like a rip off because they promise people they can make a large amount of money quickly. I know not all MLM is bad but so many of them look bad which makes me tend to shy away from all of them. It’s my feeling that spamming the work from home communities with these offers does nothing but turn people off.

Miranda Grimm

December 16, 2013 at 8:55 pm

I agree 100% Patti. Too many of these over-promise in a desperate effort to grow their down-line and they turn a perfectly legitimate business opportunity into someone elses waste of time and money. Most MLM programs have huge failure rates because they entered into the game thinking something completely unrealistic. Then, they feel they were scammed…and in ways they were!

Charles Cloninger

December 18, 2013 at 11:34 pm

I have not personally gotten involved with MLM but my significant other and several close friends have. All with different companies. Most were scams and it was impossible in the beginning to tell the scams from the legitimate companies. So there is a huge problem right there. Without fail each person made so little money for so much work it was completely foolish. Problem two. But the leaders of the program are such experts at touching the greed button in each person and getting them hyped up, along with all of the other members, that it was impossible to talk realistically with them until the sad end when they were so impoverished they could just not go on. Problem three. Having gone to several different meetings (they call them different things to take the focus off the fact that they are sales hype meetings) I noticed the cult-like atmosphere where the leaders showed the fantastic wealth earned by those who had joined the company earlier and promising, by simply showing how easy it was, that my friends too could achieve this level of wealth. Problem four. No serious questioning of how the program worked was allowed and one was felt to be “pissing on their parade” if you weren’t completely on board with everything the leaders were saying. Problem five.

I also noted how hard my friends worked. They started early in the morning and would field calls from “prospects” (those they were trying to get into the program in their “downline”) until 11:00 pm or later. Saturdays and Sundays were also incorporated into the work schedule. They could have made twice as much money as they made if they had worked the same hours at McDonald’s. One friend calculated that he had made $.72 an hour and that didn’t count overtime pay nor the money spent on gas and wear and tear on his car nor the endless coffee at Starbucks trying to recruit prospects. Problem six.

My advice is to run like hell if someone even begins to mention something that sounds like MLM. If you stop to listen you to might be sucked in to the very attractive but ultimately unrewarding (except to those at the top) program. And if you have a friend who joins I can only say “Save your breath” because nothing you can say will make any difference if he is truly hooked. Just be there to support them when the crash comes. Because it will.

Tom Cooter

December 17, 2013 at 8:42 am

Yes, I am into Network Marketing and really enjoy
the business opportunity that Organo Gold International
has given me. So many people have a misconception about
network marketing. So whats the difference between
networking marketing and a pyramid scheme? First above
all else a pyramid scheme is illegal. Why? Simple,
its a exchange of money without products, Which has
given good Network Marketing Companies a bad name..
A good network marketing company will have a good
product, a good business opportunity and a good
compensation plan. Well, Why do some people make
good money and others do not. Thats simple too,
its called effort, desire, motivation, believing
in yourself, wanting and going after a better life
for yourself and family. Important, You must believe
and know you are offering people a very good product,
that you use yourself and have a testimony to back it
up. Next, you must provide good leadership abilities.
Why? Because you want your business associates or team
members to be successful as much as yourself.
Can anyone be into Networking Marketing? Yes. Can everyone
thats joins a networking marketing business be successful?
Yes. “IF” You have leadership abilities, You must have a
desire to succeed, You must be willing to help,mentor and
train your team, You must be willing to accept the NO’s,
which will make you stronger, you must set goals, You must
not have fears promoting your products or business opportunity,
It takes Courage, It takes a personal philosophy change, in
other words, You must set the Sails of your Thinking, The wind
blows in all directions, You have to stay on Course. Why?
When you join a good Networking Marketing Company, You actually
own your own business- Your the CEO-The Boss, Do You Want Your
Company To Be Successful or fail. That determines the winners
and losers in Network Marking.
There are bad, good and great companies. Inside those companies,
there are bad, good and great people with bad, good and great
skills. It is rare to sign into a network marketing company
and make lots of money if you don’t work on yourself and develop
not only your skills but yourself. Period! It is be, do, then
have. Become more…. Do more… Then Have more! (not the other
way around) This is true in any profession! All my best to
those in network marketing and those who are not.
If more would open their minds, so many could help their
financial situation. especially with a low cost “network marketing”

Leigh Rachow

January 24, 2014 at 2:45 am

Well said Tom – I also have a MLM business and could not be happier. I had my own traditional business for 24 years – a private business college that was very successful – with 25 staff and all the expenses and issues that goes with running your own business. I would have to be one of the most sceptical people …. and when this `business opportunity’ was offered to me – I almost ran a mile – and I would have except the person sharing his information with me was one of the most astute and professional business persons I knew. Initially I could not understand how he could be `led down the path of this type of business!!’, but on undertaking my own due diligence and not taking his words as scripture, I found that this MLM Company – NuSkin is one of the top MLM companies in the Anti Aging Industry – has an amazing compensation plan; has amazing products that I tried and fell in love with; provide wonderful training and mentoring through events and of course those very successful leaders; and at no time was I ever under the impression that NuSkin was a `Quick GEt Rich Scheme’. In fact, just the opposite – I was given the honest trust – that you will get more NOS than YES’S … but those who say YES are attracted to the business because of my honesty and transparency and passion for my own business. I have been doing NuSkin from home for over 2 1/2 years, have a great team each with their own business which I am so very proud of; have a great `crowd’ of leaders and mentors in not only my up-line but cross lines who always are happy to share their experiences, positive and negative, to help me in my own business …. what more could I ask for. So for those who are still skeptical about Network Marketing – take it from one who has been `turned’, not through greed, but through finding a business that suits my personality; my passion (wellness, health) and my values and beliefs. NuSkin provides all this and more – and on top of all that, I get paid for doing what I love – even when I am on holidays, or sick. This never happened when I had my own business. MLM with the right company can provide anyone who is willing to work hard, be consistent, be coachable and want to help others solve their problems, be it health, weight management; personal wellness; skincare; and financial freedom if that is their choice – then don’t turn down the opportunity because of the `bad apples’ in the barrel – do your own due diligence.


December 17, 2013 at 9:08 pm

I am so suspicious of most biz opps, especially those where there isn’t a physical product and there is such pressure to recruit, recruit, recruit. I know some people are making money with MLM’s, but there are SO many that are just losing it trying one system after another. 🙁


December 23, 2013 at 11:53 pm

That was my issue with MLM’s too. They just focused on pushing the business. Selling kits, etc. For a business to thrive and grow, it has to provide quality products or provide a service. I found a good fit. Do extensive research and ask questions. Good Luck. Contact me anytime to trade experiences 🙂 – friend me

Rav Barring

December 18, 2013 at 1:54 pm

After running multiple businesses into the ground and losing amazing amounts of money over the last 10 years. (Atribute cutting loose businesses that have been over regulated and extorted by the local, State, and Federal Government.) I’ve come to the conclusion that MLM is the most effective way of conducting business in America. Referral marketing exists without MLM structure. Only you don’t get paid on your referrals. I’ve become unemployable as I’ve ran my businesses and made more than 6 figures making my own decisions. I believe MLM’s give the best write offs. Low Cost, High return potential being that they are home based. Follow the rules outlined in this BLOG to finding the best MLM. The companies are great. The leadership you enter into may not be so fantastic. Remember though, you are in business for your self. A corporation is a Pyramid Scheme. You’ll never make more than the CEO or Board of Directors. The Stock market is one legal Ponzi scheme where you can gamble the money left over before or after tax’s in hopes of making more. Your not investing in anything. The Dollar is losing value, houses only pay off if you have paid them off with renters money and sold at peak.