Prospective distributors often ask how they can find out if a MLM, network marketing, or direct selling company is legal or if it’s a pyramid scheme. There are a number of ways to research the company yourself; to be sure of its legality before joining.
Here are some ways which you can investigate a MLM company:
1) Check to see if it is a member of any industry associations, like the DSA or DSWA.
2) Call your state’s attorney general’s office or consumer protection division. Most states regulate direct selling companies through these agencies.
3) Check with the Better Business Bureau.
4) You can check the company’s financial information (especially if they are publicly traded – corporate reports are available from online services) by accessing a credit reporting service, like Dun & Bradstreet.
5) Ask your sponsor (or potential sponsors) for the names and numbers of some other distributors. Check the company’s references just as you would check a job applicant’s references.
6) Attend one of the company’s training seminars to see how the company operates first hand.
7) Check industry trade publications for any information on the company, like Entrepreneur magazine.
8 ) Many times the company’s products will be regulated by government agencies, like the FDA. You can check the credibility of the products in some cases by contacting such government agencies.
9) Do some digging: gather as much information from the company itself, like the number of years they’ve been in business, the number of distributors they have, what countries they operate in, etc. This information will give you an idea as to the company’s credibility. A good source for this information is available here.
Checking a company’s legitimacy can be time consuming but highly beneficial in the long term.
Information about pyramid schemes is available here.
And if you are wondering how to make sure that the direct selling company that you’re starting is not an unintentional pyramid scheme, be sure to contact us for your free legal consultation: 503-226-6600 or www.mlmlegal.com.
