Most people outside the industry might have only a vague notion about multilevel marketing, also called network marketing and direct selling. It often involves personal sales of cosmetics, wellness products or home decor items — or as critics flippantly call it, "pills, potions and lotions" — usually sold through product parties hosted by friends or relatives.
For sellers, the companies offer the appeal of starting a business on the cheap with little training, working from home and being their own boss, if only for part-time money. Some might recruit friends and family to become sellers, which augments their own commissions and gives them a shot at the six-figure compensation many such marketing companies tout but few distributors attain. The recent controversies might raise the question: What's the difference between a legitimate multilevel marketing company and an illegal pyramid scheme, in which only people who get in first — at the top of the pyramid-like structure — make money and everyone else is a dupe?
The harshest critics maintain there is no difference, that there's no such thing as a legitimate MLM and that the industry's secrets stay safe because of a cultlike mentality and a blind eye of regulators. Jon M. Taylor, who was once a seller for an MLM company, said he has studied the industry for 18 years and analyzed more than MLM companies.
He maintains the website MLM-thetruth. He said all MLM companies have the same flaw: They depend on endless chains of recruiting new members. Tracy Coenen, a forensic accountant and fraud investigator with Sequence Inc. She is also a critic. The Direct Selling Association says MLMs are legitimate businesses, and that the group has about members carefully screened by the organization to ensure they are not pyramid schemes and don't use deceptive practices.
The difference between a legitimate business and pyramid scheme comes down to products. If the company and its distributors make money primarily from the sale of products to end-users and not boxes of product accumulating in a distributor's garage , it's OK.
Ask tough questions and dig for details. A good businessperson needs those answers. Here are some questions to ask:. Federal Trade Commission Consumer Information. Search form Search. Depending on your type of business, you may be able to get away with a basic website where prospective clients or customers can learn a little bit about your business and how to contact you.
But not having one at all will likely hurt your business. You can register your business on Google so it comes up in online searches. This is especially important if your business has a physical address and specific business hours. Business insurance is designed to keep you in business when losses come along. Without the right coverage, the high costs of lawsuits, property damage or employee injuries could bankrupt a new or growing company. Visit our partner Mylo to learn more.
This article was originally written on May 11, and updated on June 25, This article currently has ratings with an average of 4. Gerri Detweiler is Education Director for Nav. Known as a financing and credit expert, she has been interviewed in more than news stories, and answered over 10, credit questions online. She has testified before Congress on consumer credit legislation.
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Reviews Disclosure: The responses below are not provided or commissioned by the credit card, financing and service companies that appear on this site. Your email address will not be published. Save my name and email in this browser for the next time I comment. I want to establish the business credit and I need assistance to help establish and build my business. It will walk you through building business credit. You can download it on this page. Find help here.
Great informative article! Do you have any t Other advice for Airbnb businesses…I stage homes too. Thanks for responding!
It is a business after all! That said if you have multiple LLCs to hold real estate, then you may want to focus on building business credit for the main one. I have uline, crown supplies and NAV. While there are rules and regulations about setting up a business or company in Australia, authorisation to operate does not guarantee honesty.
Some traders may even pretend to have authorisations or licences that they do not have. Business cards, registration numbers or other forms of identification do not necessarily prove that a business or trader is legitimate. If you are in any doubt about the credentials of a business or trader that you are dealing with, do some research and verify any information they provide. If you are not satisfied it is better to deal with someone else. Companies, businesses and other traders must be registered before they can operate legally in Australia.
While having the correct registrations doesn't guarantee that the company or business is totally genuine, it is a good start.
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