This is a question that might take one thousand pages to answer. You will find endless articles and videos at www.mlmlegal.com and www.mlmattorney.com on differentiating a legitimate direct selling company from a pyramid scheme.

Key features of a legitimate compensation plan include a program which offers quality product/service at a reasonable price, which is purchased by ultimate users (of end-consumers), who use the product/service and who purchased it because they want it. The product stands on its own in the marketplace as opposed to purchases or payments that where the predominant intent is merely to buy into the program. Pyramids are characterized by bogus products (think wishes and prayers), high investment from consultants to buy-in to the company, inflated pricing, inventory loading and where the primary intent of the compensation plan is to cause individuals to pay money for the right to qualify for the program, causing others to do the same and so on.

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For a MLM company, it is imperative to have multiple solutions in place as a company grows.

This is a question for a MLM startup or existing company as opposed to a MLM consultant. For distributors who drive customers to their replicated websites, the company has in place credit card processing capability.

For a MLM company, it is imperative to have multiple solutions in place as a company grows. In fact, fast growth of a network marketing company often triggers major concern for the credit card processor because of the exponential potential liability in the event of charge backs or failure to deliver on the part of the network marketing business. Thus, fast growth may cause a merchant account processor to demand, in exchange for what it perceives as higher risk, larger reserves, higher rates and even hold backs on distribution of funds to the MLM company. Of course, failure to access funds will prove devastating for a MLM company that must pay commissions and pay its own vendors. Pleas by the MLM company often go unanswered by merchant processors and many companies have either faced collapse or actually collapsed as a result.

The short answer is for any startup or existing MLM company is to make sure that it secures multiple processing accounts from different processors and banks. In addition, it should be in touch with a reputable consulting firm that represents companies in the search of back-up merchant account vendors. The time to search is not during the crisis, but before the crisis occurs.

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Our next Starting and Running the Successful MLM Company Conference takes place February 27th & 28th, 2014 in Las Vegas. Call 503-226-6600 or 800-231-2162 to register.

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