Warning: Read This, Before Joining Network Marketing

Network marketing, which is also known as multi-level marketing, has become more popular in the last decade then ever before, even though it has been around for numerous decades. Unfortunately, when most people think of network marketing, they instantly think that it is illegal.

Network marketing, which is also known as multi-level marketing, has become more popular in the last decade then ever before, even though it has been around for numerous decades. Unfortunately, when most people think of network marketing, they instantly think that it is illegal. The fact is that network marketing is actually quite legal, but it is often confused with something else altogether.

Network marketing entails earning money from the sale of products or services, and earning money through other distributors that you bring into the company, based on their sales. It is actually the oldest form of what we know today as affiliate marketing, where you sell someone else’s product for a commission. All of this is perfectly legal.

People who are involved in network marketing are often called distributors, associates, franchise owners, consultants, independent agents, or independent business owners. Sometimes, they are even called affiliates. With all of these names, the term independent business owner is the most accurate, because the person actually does work for themselves, but they make money for the parent company as well. A network marketer has an up line coming into the business, which is the people who recruited them, and after they enter the business, they build their own down line, which dramatically increases their income.

Again, there is nothing illegal about this. The up line earns money on sales made by the network marketer, and the network marketer earns money on sales made by their down line members, as well as through their own sales. However, all of these people may also earn a little money just for bringing a new distributor in as well. This remains legal, as long as that isn’t the only way that money is made in the program. In other words, it is fine to make money by bringing distributors into the program, but one must also be making money from product sales as well.

So, with all of this, why is it that so many people instantly think that network marketing is illegal? Some people think it is illegal because of pyramid schemes, also known as Ponzi schemes, which were disguised as network marketing opportunities. Today, some illegal schemes still try to disguise themselves as network marketing opportunities, and this is why it is so important to know the difference between the two.

If a network marketing opportunity is legitimate, it will offer commissions on sales and recruiting, but will never offer commissions on recruiting alone. In fact, just to make things clear, many network marketing companies today will not offer any income simply for recruiting a new distributor, and instead, you will only earn commissions on sales made by you and your down line members.

A definite distinguishing factor of a scheme is that the bulk of your money will be earned by recruiting others, and you will be required to buy a certain amount of the product each month, as will your down line members. In most cases, you end up buying more products than you are actually selling.

How will you know the difference without actually getting into the program? Use the 70% rule. The 70% rule applies to distributors who are required to purchase inventory in advance of selling it to others. If you are allowed or encouraged to purchase more inventory, before selling at least 70% of inventory previously purchased, you are probably dealing with an illegal scheme.

Unfortunately, you may not know this until you join the program. However, the FTC requires business opportunities to give prospective buyers enough information to make a good decision today. Therefore, the new way to recognize a legitimate network marketing opportunity is to look and see how much information they are willing to give you up front – before you make an investment. If the company doesn’t seem to be answering all of your questions, you should probably walk away.

However, to answer the question in regards to whether or not network marketing is legal, you should know that it is, in fact, very legal. The only thing you need to be able to do before getting involved is to recognize the difference between a legitimate network marketing opportunity, and a scam.