Is Your MLM/Multilevel Marketing Business Legitimate?

By Ted Riley
Posted Saturday, November 6, 2004

INTRODUCTION

A legitimate multilevel marketing business is a great way to get a legitimate residual income that could change your life from the 9-5 rut to a life of financial freedom. But there are many pitfalls out there that will make achieving this difficult. (Or even illegal depending on the MLM you decide to sign up with.)

There are several ways for a person to ascertain whether or not a multi level marketing company is or is not a legitimate MLM. There are a few things that can be checked to make sure you are not going to get involved in something that breaks the fifty or so statutes that govern this type of company.

TYPE OF PRODUCT

One of the ways to separate the legitimate MLM from the scams is by looking at the type of product that the multilevel marketing home business will provide. Many multilevel marketing home business ideas work on the principle that they will be charging way too much for the service or product they will provide. So check that the company is charging a fair price for their product. Also check that you can become involved with the company without having to pay for a huge amount of inventory. This is also the way that many scams operate, on the idea of selling to people who think that they will be selling in large volume from the get go and not caring what happens to the investor after that. If you have to invest thousands in a multilevel marketing idea then it is best to head in the other direction fast.

It is best to ensure that you can be a sales representative with little or no more than the purchase of a sales kit or demonstration materials.

COMPENSATION PLAN

Looking at the compensation plans of your prospective multilevel marketing company is one fo the best indicators as to whether or not it is a scam. Check whether the compensation plan pays bonuses or commissions purely on the basis of recruiting more people into the company. If it does, it is illegal. It is also not a legitimate MLM if it pays headhunting fees as this is also illegal.

A home business idea such as a legitimate MLM is great because of the relatively low financial risk involved. This may not ring true to the work at home business ideas you have seen but the good multi level marketing companies will buy back the sales kit and any re-sellable materials from any of those who wish to cancel. This is actually required by law so have a look at this before handing any money over.

PERSONAL USE OF GOODS

The FTC also rejects the idea of personal use of the goods or services that you will be providing as a legitimate retail sale. But the debate continues over whether or not the sales to non-participants and purchases in reasonable amounts are retail. There are big grey areas in the world of multilevel marketing so keep abreast of the laws and statutes in your state.

TRAINING

Probably the single best way to ascertain whether or not a company is a legitimate MLM is to look at the training that will be provided in the way of sales and recruitment. Any company worth its salt will want to have people who know what they are doing. So they will provide training to those who have little or no idea how to sell or market a product.

Also, having a clear idea as to what you will be doing is important in choosing a work at home multilevel marketing business. It is astounding to see how many companies do not stipulate whether or not you will be in a selling, supervising, distributing or soliciting role which is required under federal law.

Ted Riley is an entrepreneur and educator interested in teaching others on the benefits and rewards of having your own home business. He writes frequently for the web site "A Grandmother's Business", a web site dedicated to the needs and equirements of the mature woman entrepreneur and job-seeker. To see more articles like this visit: (http://www.grandmabiz.com/)

About the Author
Ted Riley is the managing editor for Web2Voice.com. Web2Voice is dedicated to bringing consumers and small business entrepreneurs useful articles that are thought-provoking, timely, and informative.