Legitimate MLM and Party Plan companies are generally welcome businesses in the United States and throughout the world. State and federal agencies continue adopting legislation for network marketing companies, establishing standards for companies to follow, differentiating them from illegal pyramids. Staying MLM legal is the only way to do business.
Because network marketing and direct selling companies offer such potent rewards and incentives for those volunteer sales representatives and distributors who help their companies grow, both the great and the awful are drawn to direct selling. While the great contribute to this very legitimate profession, the awful steal from the magnificent opportunities through abusive, fraudulent and illegal pyramids and scams. Since fraud, deception and loophole seeking are the tools of thieves, regulations are regularly evolving and changing in an ongoing attempt to protect and encourage the legitimate MLM business models while slamming doors on the scamsters.
So what is a startup MLM or Party Plan company to do? In simple terms, learn about the basic MLM legal issues and participate in creating a legitimate business that will last for years.
The following checklist of MLM legal issues will help you to begin to identify where you are knowledgeable and confident, and where you can use some brushing up as you prepare for launch:
- Is our compensation plan MLM legal in all 50 states?
- Is our company registered in the states that require timely registration?
- Do we have the proper business entity set up that meets our needs?
- Do we have the right sales tax strategies in place in order to remain MLM legal?
- Are the policies & procedures properly drafted?
- Do our policies & procedures comply with the most stringent states so that they are effective and enforceable in all states?
- Is our electronic enrollment and ordering system in line with e-commerce laws?
- Are our products properly labeled and represented?
- Does our literature comply with legal requirements?
- Do we have a good training system that supports distributors in fulfilling their roles and responsibilities?
- Are our customer service reps trained in responding to policy questions and staying MLM legal?
- Do we comply with the hiring and labor laws?