How are MLMs different from illegal pyramid schemes?

The primary difference between a legitimate MLM company and a pyramid scheme is that an MLM company makes its money by selling products or services. In pyramid schemes that masquerade as MLMs, people coming into the organization pay money for the right to sell a product and the right to benefit by recruiting others into the organization. Selling the actual product or service, if it even exists, is incidental to recruiting.

Because of their emphasis on recruiting and other practices, some MLM companies that do sell products have been accused of illegal practices in various states. A few have been banned in some states. If you have any doubts about the legitimacy of an organization, check it out by calling your state attorney general's office or city consumer affairs office.

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