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Could your MLM be a pyramid scheme?

On Behalf of | Oct 3, 2020 | Criminal Defense

Multi-level marketing programs are rather abundant. You likely know at least one person who is a part of one.

The trouble with MLMs is that they are often nothing more than a pyramid scheme in disguise, and those schemes are illegal. The Federal Trade Commission explains there are certain signs that an MLM is actually a pyramid scheme.

A true MLM

A true MLM, which is completely legal, will allow you to make money even if you never recruit anyone else into the business. Most MLMs will have two sources of income. You can sell the products and recruit people. You earn money off the sales of our recruits and those they recruit, which is your downline.

Most often a legitimate MLM will not result in a huge money-making venture. Many times, you will lose money. Unless you are a great salesperson or build a large following of buyers, it is tough to make good profits.

A pyramid scheme

An MLM that is a pyramid scheme relies on recruiting and building your downline. You will focus on that part of the system much more than actually selling the products.

Spotting a scheme

You can often tell a situation is a pyramid scheme because the company will make huge promises. They also usually offer amazing rewards for leveling up. You typically have to pay repeat fees, and they push recruiting more than selling the products.

It is common to join a pyramid scheme and not be aware of it. However, once you realize that is the situation, you should get out. While it may seem like you can make a lot of money thanks to the marketing the company does, in the end, you will lose everything you invested.