The Ultimate Guidelines for Legal MLM Plan

Network marketing business is often used by MLM (Multi-level marketing) companies as an effective marketing and promotional strategy where sales person sells their products/services to customers/direct selling businesses. Additionally, they also recruit new members as his/her downline and thus, the process continues. Like this, a hierarchy structure is formed whose aim is not just add members to the team but also attract more people that can carry selling of products, taking business to a new height. As the profit of the older as well as new member’s increases, the team expands. The entire process is referred as MLM or network marketing.

Often Multi-level marketing is one form of direct selling as products/services are sold directly to consumers. In addition, members of the salesforce company generally are treated as independent contractors, who earns income based on their own expenses and revenues.

As it is clear now that MLM companies desire to develops compensation plans where distributors receives commission depending upon the purchase made and utilization of products by downline members instead of retail selling to their party. This is often logical approach as entire business is dependent on the personal relationships with members. Government has also approved direct selling business as legal. However, due to some distracting elements of the market, people often have perception even today that it is illegal. But in reality, it is not.

Federal and state multilevel marketing and anti-pyramid statutes are constituents of a broad consumer protection act. Such laws are implemented to offer protection to individuals from being cheated through illegitimate programs that attracts participants with the promise to earn money by counterbalance them from the investments of additional members rather than from authorized product sales. These are termed as “Ponzi schemes”.

Whether a program is an illegal pyramid or a legitimate MLM plan largely depends on two important factors that is;

1. The way in which members of the plans are compensated.
2. The method by which products are sold or services are offered.

To make it simpler, if a MLM plan compensate members by selling their enrollees and their downline recruits then it is called as multi-level. However, if the plan compensate participants indirectly or directly just for the enrollment of other members into the team, it is a pyramid.

The government has issued guidelines to regulate the direct selling business. This will helps in strengthening the existing regulatory rules on MLM and protect general consumers’ interests and rights from fraud money circulation schemes. According to the recent guidelines issues by government in 2019, some of its striking features are:

• MLM companies must guard themselves being classified as a pyramid on both the federal and state levels.
• It is mandatory to understand the basic terminology before starting or implementing MLM into your business.
• Multilevel marketing companies should have at least one bank account. Also the participating companies should clearly state the business’ nature in the deeds.
• The direct selling companies must pay agreed bonus/incentives to members within the predefined time.
• Network marketing companies should submit a complete list of products that they wishes to promote and also MLM plan during their registration process. On the other hand, the existing direct selling companies can also add the same in the current version after guidelines are published for the same.
• Every multi-level marketing companies should submit the undertaking to the Consumer Affairs’ Ministry within 90 days of guidelines’ announcement.
• The company should not encourage their direct seller to buy more products or avail more services than expected by consumers.
• Network marketing companies must maintain their business dealings record with complete details such as terms & conditions of the plan, details of the direct sellers, income plan, active status, earning of members, etc.

These and many more genuine guidelines for legal MLM plan can save many people in getting trap in the fraudulent companies. Many Companies offer Best MLM Plans Software for companies of all sizes. By offering the world-class network marketing software, many people can boost their business and earn handful ROI. So, be aware of all the legal guidelines and cherish the benefits of direct selling business by staying ahead of your competitors.