What are the biggest legal risks when starting and running an MLM company or Party Plan company?

Business risks abound, and there are no exceptions in network marketing and party plan models. Considering the scope of MLM law, a person could literally worry herself or himself to death or at least become fully consumed were they to attempt to identify all the risks. In order to provide some peace of mind as well as a checklist of legal risks in MLM, Party Plan and Network Marketing, consider some of the risks that are summarized below from the world of MLM law, and look for opportunities to discuss with your legal advisor:

  • Illegal compensation plan
  • Policies & procedures that do not comply with state or federal requirements
  • Exposure for earnings claims or inflated earnings representations
  • Insufficient liability protection including proper insurances
  • Policies and procedures that remove control from the company
  • Treatment of distributors as employees rather than independent contractors
  • Lack of protection regarding the National “Do Not Call” Registry
  • Products that have no “real-world” marketplace
  • Products that are sold at inflated prices
  • Product misrepresentations or illegal product claims and how MLM law defines the rules
  • Fees paid solely for recruitment instead of sale of product
  • Large inventories of unsold product held by distributors
  • Mandatory purchases of products or services
  • Requiring substantial investment
  • Inventory “loading” or “bank” qualification and how MLM law regulates
Show Comments

Comments are closed.