Figure Out If It's a Pyramid Scheme by Asking the Right Questions

If you plan to buy a multilevel marketing plan, get the details.

Computer keyboard [illustrative]. (photo credit: ING IMAGE/ASAP)
Computer keyboard [illustrative].
(photo credit: ING IMAGE/ASAP)
What is the difference between a multilevel marketing program and a pyramid scheme? The pyramid schemes are illegal.
If the money you earn is based on what you sell to the public, the company can be a legitimate multi-level marketing plan. These are some signs that the company is operating a pyramid scheme:
  •  You have to pay high registration fees
  • Your income is based primarily on the number of people you recruit, and the money paid by those new people recruited to join the company
  • They force you to buy things you do not want or need, just to have a good status in the company
  • And another key difference: It is possible that you lose money if you sign up in a pyramid scheme
MLM Marketing
If you plan to buy a multilevel marketing plan, get the details.
Make sure your income is based on sales to the public, not on what you must buy for yourself or on the number of people you recruit.
Be skeptical of stories "from ragged to millionaire" or with images of luxurious lifestyles achieved through participation in the program. These stories may not represent the experience of most members.
Even if it's a company that sells products or services that you're familiar with-or if the company boasts famous members-it may not be a legitimate plan.
For further reading and a thorough discussion, make sure to do your homework by reading an mlm review blog.
Pyramid Schemes
And so, while multi level marketing can definitely be a legitimate method of marketing, there are other negative examples of pyramid schemes.
One of the most famous cases of a pyramid scheme was the Madoff Investment Scandal. In December 2008, the former NASDAQ Chairman, Bernard Madoff, admitted that his company managed an elaborate Ponzi scheme. Madoff offered low yet steady returns on investments, but instead of yielding actual returns, the company paid it from new clients’ money. In total, the company lost $800 million of client invested money.
MLM Companies
According to the accumulated data listed and edited in Wikipedia, there are about 60 companies worldwide which use multi-level marketing for most of their sales. While you should always be careful and look into the details, these seem to be considered to be legitimate MLM companies.
These companies include: 5Linx, ACN Inc., AdvoCare, Ambit Energy, Amsoil, Amway, Amway Global (previously known as Quixtar), Arbonne International, Avon Products, Beachbody, Beautycounter, BioPerformance, Discovery Toys, doTerra, Forever Living Products, FreeLife, Fuel Freedom International, Isagenix International, Juice Plus, Kleeneze, LegalShield (previously known as Pre-Paid Legal Services), LifeVantage, The Longaberger Company, LuLaRoe, Lyoness, Mannatech, Market America, Mary Kay, Medifast, Melaleuca, Morinda Bioactives, National Safety Associates, Nature's Sunshine Products, Neal's Yard Remedies Organic, Neways, Nu Skin Enterprises, NXIVM, Omnilife, Oriflame, The Pampered Chef, Primerica, Qnet (previously known as QuestNet, GoldQuest, and QI Limited), Rodan + Fields, Shaklee, SeneGence, Stream Energy, Success University, Sunrider, Tastefully Simple, Telecom Plus, USANA Health Sciences, Vector Marketing, Vemma, ViSalus, Wakaya Perfection, Watkins Incorporated, World Financial Group, XanGo, Young Living, YTB