MLM Business: Legitimate or Pyramid Scheme?


Many people have the misconception of MLM business thinking that it is a sort of pyramid scheme.

Is it or is it not?

You see, a network marketing or MLM business is a type of business where an individual can do or join.

It is similar like a franchise business where people can buy a franchise and sell their services or products.

You can do the same in an MLM business.

When you join a MLM company, you become a distributor or representative and can sign up other individuals to become representatives like you.

By doing so, you are adding a business partner to your organization.


The earnings or profits for each person will depend on their own sales and the sales of their members.

Some company also provide bonuses when a representative hits a certain target.

The compensation for representatives also gets larger as his business expands.

Sometimes, a MLM company may change their compensation plan in order to provide higher commissions to their members due to good growth of the company.

This is because the profit of the MLM Company depends on the collective efforts of all of their representatives.


As for pyramid schemes, this type of opportunity is often established in order to manipulate the distribution method of a MLM business module.

In a pyramid scheme, only one party will benefit while the other party do not and the profit most often comes to an end causing the company to go bust.

The reason many people link a MLM business to a pyramid scheme is because they failed in the MLM opportunity that they had joined previously.

Some may have been overpromised by their recruiter but end up no achieving the result they were promised.

However, one of the biggest reasons is representatives who treat their MLM business like a hobby.


In a legitimate company, profits are made from sales of their product or services and this is the same in a network marketing company.

Members do not make money from signing up people.

The signup fee paid by the new member is paid to the company, not the recruiter.

The signup fee can be considered as the license needed by the representatives in order to market and sell the products from a MLM company.

Due to the signup fee, this type of business is always criticised and is considered as a scam.

In fact, may recruiters tend to target new members by offering them a so called ‘work from home’ opportunity?

But the truth is, a MLM business is a business that you can do from home and not a job.

This is where many people get conned and then they slam the MLM business saying that it is a scam.


In a MLM business, you don’t get paid according to the hours that you work.

You get paid based on your sales and the sales of your organization.

The bigger your organization, the bigger your commissions.


So is it a pyramid scheme?

It is if only the top person gets paid.

But everyone in a MLM company can get paid if they build their organizations.

And when their organization grows big, guess what?

They are at the top of his organization but each person below him has their own organization.

So, everyone gets paid when they do the work.


Have a wonderful day,

Rui Ludovino

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