Illegal Vs Legal MLM - Get the Difference

Illegal Vs Legal MLM - Get the Difference

Direct selling business is often considered as a fraud or an illegal pyramid scheme. A lot of people refrain from joining an MLM company or purchasing the products offered by an MLM company due to these doubts. However, the direct selling business has become a legitimate and legal business in India and fortunately, there are several bases on which the difference between a legitimate and an illegal MLM company can be derived. 

So here are some core differences between an illegal and legal MLM you should know if you are interested in becoming a direct seller or are willing to use the products sold by MLM firms:
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  • In a legal MLM company, an employee or consultant can overtake a person who employed them and can even make more money than them. while in the pyramid scheme, an employee has a fixed position and cannot overtake the higher authorities
  • In a genuine MLM company, a consultant does not earn a single penny until he/she sells a product. The income is strongly derived by sales. In the pyramid scheme, employees are paid for recruiting other employees and bringing in more people in the network
  • In a legal MLM company, a consultant does not have to pay any registration fees or joining amount to the company. However, in a pyramid scheme, companies ask for some kind of joining fees or deposits
  • The legal MLM firms have more customers and ample of consultants/direct sellers while the pyramid schemes do not have a well established customer base and can collapse anytime
  • The legal MLM companies are prohibited from buying bulk or excessive products during the time of enrollment as it is more than the necessary amount of products to fulfill the initial orders. The illegal companies might allow making bulk purchases
  • The legal MLM companies offer training kits and sales materials free of cost or at minimal charges while the illegal firms charge extremely high amounts for offering such materials. Also the purchase of such materials is not mandatory but the illegal companies mandate purchasing such materials
  • The legal companies have a buy-back policy in which, if a direct seller is left with huge stock while cancelling the participation while the pyramid schemes do not offer any such policies or flexibilities



References:

https://www.streetdirectory.com/travel_guide/147715/multi_level_marketing/the_difference_between_mlm_and_illegal_pyramid_selling.html

https://www.quora.com/Whats-the-difference-between-an-illegal-and-a-legal-multi-level-marketing-company

https://www.thebalancesmb.com/is-it-multilevel-marketing-or-a-pyramid-scheme-2947159

http://www.mlmattorney.com/difference.html

http://www.mlm-thewholetruth.com/network-marketing-success/pyramid-scheme-or-legal-mlm-how-to-tell-the-difference/

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