Is multi level marketing legal?YES, multi level marketing is legal.
The decision on what makes multi level marketing legal came from the Amway vs. FTC case in 1979. In order for an MLM to be considered legal, there is one question asked. "Can the last person in still make money? In a scheme, the last person will not make a penny. Because at some point in time the scheme will collapse. Leaving the last investors with nothing. Now the trick is that schemes such as pyramids or ponzi's look initially like legal business opportunities. This is where you must do your homework to distinguish the difference. The federal and state governments both have strict laws on what makes an MLM legal. However, the state is more involved in regulating schemes that mask themselves to appear as MLM companies. Most states use a similar definition of what an MLM company is.
"Multilevel distribution company means any person, firm, corporation, or other business entity which sells, distributes, or supplies for a valuable consideration [of] goods or services through independent agents, contractors, or distributors at different levels wherein such participants may recruit other participants and wherein commissions, cross-commissions, bonuses, refunds, discounts, dividends, or other considerations in the program are or may be paid as a result of the sale of such goods or services or the recruitment, actions, or performances of additional participants."
www.mlmlaw.com/library/guides/Primer.htm
In 2002, the co founder of EarthLink, Reed Slatkin, plead guilty to 15 federal charges. He was accused of defrauding investors out of $600 million. Slatkin made claims to investors that he could get them huge returns on their investment. Once word spread around, the scheme came to life. He orchestrated the largest ponzi scheme in US history. Slatkin stole money from more than 800 investors; some of whom are Hollywood celebrities and high power business men. The point of this story is it can happen to anyone. Even Hollywood and Corporate America. So do your homework before you invest. Questions to Ask before InvestingIs multi level marketing legal? Yes. But you should ask yourself the following questions in order to determine if the opportunity that you are looking at is legal:1. What is the history of the company? 2. Are you required to meet minimum sales goals? 3. Is there a product involved of real value? 4. Does the company require huge inventory purchases? 5. Does the company offer inventory buy backs? 6. What is the history of the founders of the company? 7. How are the profits of the company earned? 8. What is the vision of the company? 9. Can you earn commissions from product/service sales only? 10. Are the claims of the company realistic? 11. Does the MLM company do business with other reputable companies?
The most important thing is research. You must research what you are doing before you do it. Because once you invest, you may or may not get your money back if it's a scheme.
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