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Vocal critics are abundant in the direct selling industry, but the positives drown out the negatives. It’s not hard to find a loud voice criticizing the direct selling industry through a quick Google search. And it is true… there are many pyramid/Ponzi schemes, primarily internationally based, that parade themselves as MLM/direct delling… and they are not. They are merely pyramid headhunting recruitment schemes that often use bogus products and services as an excuse to move money. The entire emphasis of such organizations is to cause investors to pay money and cause others to do the same, with a thin veneer of an actual product or service. In fact, the revenue to pay commissions instead comes from distributor payments and not sales to the ultimate user.

Despite this, the facts remains MLM and direct selling are a major part of the fabric of commerce. Statistics on 2014 sales, compiled by the World Federation of Direct Selling Associations, indicate global sales of $183 billion and 100 million distributors. In the U.S., there are 18 million distributors posting $35 billion in sales. Numerous direct selling companies are traded on the NYSE.

Many direct selling companies have histories dating back to the 1800s (see our MLM company profiles page to read over 700 MLM company profiles). Avon, alone, dates back 130 years. Companies like Avon, Mary Kay, and Tupperware have long and credible company histories and support thousands of households in the U.S. and internationally. Network marketing has a lengthy history of reputable companies. This industry supports millions of independent consultants in the United States and abroad.

Finding a Good MLM Company

How do you find a good MLM company for you? There are ways to make sure that a direct selling company is a good business and ethical. First, contact the industry association websites, such as the Direct Selling Association (DSA), to see if the company is a member and if they abide by the DSA’s Code of Ethics.

Secondly, if you’re considering becoming a part of a startup network marketing company, learn how to recognize some red flags. Is the company offering a tangible product or service? Make sure that the company offers a product or service, and not something intangible, such as prayers or wishes. Does the company ask for an unreasonably-high investment to join? Startup kits average anywhere from $50-$150. If a company is asking for $500 for their startup kit, perhaps you should begin asking more questions. This alone is not a sign of a company operating illegally, but can be a sign to look for additional clues for questionable practices. Does the company focus its mission on primarily recruiting new members and not focus on the sale of product (or service) to the end consumer? A legally-operated MLM company will have a primary focus of selling products (or services) to the consumer, not just in recruiting new consultants.

Be sure to investigate any opportunity that you are considering joining and due your own due diligence. And, if you are starting your own network marketing company, it would be wise of you to hire a credible MLM attorney that specializes in direct selling law.

And probably your best educational resource: check out the hundreds of articles, videos, company profiles, etc. at MLMLegal.com.

If you are interested in attending the Starting and Running the Successful MLM Company conference visit our conference page, view our speaker list, or get more details. All executives/owners of direct selling companies are welcome to attend. Call 800-231-2162 to register.

Visit us at www.mlmlegal.com to learn more.

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A Conversation with Jeff Babener Video Series: Multilevel marketing is a mature, professional industry. Choose a company with a good training program. There is an abundance of opportunity in this industry. As in any business, do your homework. Doctors, dentists, along with truck drivers and waitresses are known to participate in network marketing. There is plenty of opportunity for friendly, hard-working individuals. Watch the video.

What to Expect Working in Network Marketing - YouTube

Visit us at www.mlmlegal.com to learn more.

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MLMLegal.com Launches New Newsletter: MLM News Global

Sign up today at http://www.mlmnewsglobal.com/.

This newsletter offers recent news, videos, company profiles, and weekly articles delivered to your inbox on a timely basis. Each newsletter contains top news stories in the network marketing industry, the most recent MLM scam alerts, timely articles on the direct selling industry, and so much more.

Make sure you’re not the last to know about top MLM news stories, or to hear about the latest scam reports. Our timely headline reporting will keep you up-to-date on stories that affect everyone in the network marketing industry.

We will also make sure you receive a “Video of the Week” on industry educational topics, such as distributor education, industry Q&A, executive interviews, MLM startup, and pyramid schemes.

Each newsletter features the profile of a direct selling company, like Avon, Mary Kay, and Amway, or perhaps a startup multilevel marketing company that you haven’t heard about yet! MLM News Global also highlights two featured articles on industry-related topics, such as pyramid schemes, compensation plans, recruiting, lead generation, legal analysis, software, and more.

The MLM News Global Newsletter is presented by industry educator, MLM legal expert, and network marketing business consultant, Attorney Jeff Babener.

Sign up today to receive valuable MLM, network marketing, direct selling content, an imperative to anyone in the direct selling industry. Join our newsletter today!

Check out our Archives for past issues.

Learn more business tips at www.mlmlegal.com and www.mlmattorney.com.

If you are interested in attending the Starting and Running the Successful MLM Company conference visit our conference page, view our speaker list, or get more details. All executives/owners of direct selling companies are welcome to attend. Call 800-231-2162 to register.

Our next Starting and Running the Successful MLM Company Conference takes place in Las Vegas. View our conference flyer and speaker list online.

If you’re reading this blog post and the conference dates above have passed, check our website for the current conference dates.

Visit us at www.mlmlegal.com to learn more.

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A Conversation with Jeff Babener Video Series: Have you heard that Harvard teaches MLM business classes? Learn about this myth and others by watching the video. Learn where you can get educated on multilevel marketing. Myths and falsehoods plague the network marketing industry. Know truth from fiction. Watch the video.

Three Network Marketing Myths - YouTube

For more information, visit mlmlegal.com.

Visit us at www.mlmlegal.com to learn more.

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Cross-Sponsoring – Distributors Who Join More Than One MLM Company

A Conversation with Jeff Babener Video Series: Is cross-sponsoring legal? What rights does the distributor have? What rights does the MLM companies have? Can a company legally ask that distributors only work for one company at one time? Distributors are independent contractors. But companies may lose distributors through raiding. What are your rights? And if cross-sponsoring is legal, is it a good idea?

Cross-Sponsoring - Distributors Who Join More Than One MLM Company - YouTube

Watch the video to learn the legalities of cross-sponsoring from both the distributor’s and the company’s perspective. To view more videos in this series, visit MLMLegal.com.

Visit us at www.mlmlegal.com to learn more.

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MLM Compensation Plans: Maxtrix, Stair Step, Unilevel, and More – Watch the Video!

A Conversation with Jeff Babener Video Series: Learn about the difference between the various compensation plans and how distributors are compensated with each plan. It’s called multi-level marketing since distributors are compensated at each level as they recruit more consultants. How many levels are distributors compensated at? Learn about breakaway compensation plans. Learn the difference between sponsors and recruits. Get the definition of each unique compensation plan and which plans are most common and which are less successful. How many levels deep is it most common to go, and legal, to go?

MLM Compensation Plans: Maxtrix, Stair Step, Unilevel, and More - YouTube

When does a compensation plan become a lottery, which is considered legal by many states? Which programs have stood the test of time, and which have gone by the wayside? Which compensation plan should you choose so that your company is legal and stands the test of time? Learn how to ask the right questions to determine a legitimate operating MLM company vs. a pyramid scheme. Watch the video.

Keep yourself educated on the legal aspects of the MLM industry. Visit MLMLegal.com. Are you starting a MLM company? Make sure you have your legal aspects covered. Contact legal MLM expert Jeff Babener for your free legal consultation today.

Visit us at www.mlmlegal.com to learn more.

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Conversations with Jeff Babener: Know the Signs: Pyramid or Legal MLM Company

Know the Signs: Pyramid or Legal MLM Company - YouTube

A Conversation with Jeff Babener Video Series: Educate yourself on the difference between a legal MLM company and a pyramid scheme. Learn the keywords, such as front-end loading. Distributors should not be required to buy thousands of dollars’ worth of product. Expect a reasonable presentation of the opportunity with no earnings hype. And have reasonable earnings expectations. No distributor should expect to make $10,000 a month. Watch the video.

To learn more, visit www.mlmlegal.com.

Visit us at www.mlmlegal.com to learn more.

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Why Do Most Companies Only Allow One Distributorship Per Family? - YouTube

A Conversation with Jeff Babener Video Series: Some companies face issue of manipulation by distributors, with distributors signing up their spouses, children, even pets. This is not so much a legal issue but a standard in best practices for network marketing companies.

Watch the video!

To learn more about the direct selling industry, visit MLMLegal.com!

Visit us at www.mlmlegal.com to learn more.

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U.S. Supreme Court Sales Tax Reversal… Where To From Here?

© 2018 by Jeffrey A Babener
(First Published in World of Direct Selling)

The future ain’t what it used to be. Yogi Berra

Or maybe it is. In ancient Egypt the pharaohs placed a general tax on the sale of all commodities at the rate of 5% of sale price.  The Romans obviously thought this was a good idea and, after their conquest of Egypt, the rate rose to 10%.  For the next 2,000 years, to this day, bureaucrats have found sales tax a favorite revenue raiser.

The Bombshell… Deja vu, all over again.

In South Dakota v. Wayfair, Inc. June 21, 2018. Slip Opinion 17-494, 585 U.S. ____ (2018). The U.S. Supreme Court overturned a 50 year old precedent on how states can tax sales by out-of-state retailers, holding that its earlier 1967 and 1992 decisions were wrong, and that it needed to rectify its mistake to reflect the economic reality of today’s interstate commerce to prevent discrimination against local brick and mortar retailers that favored online out-of-state retailers. Effectively, it abandoned a decades old bright line analysis that the “physical presence” nexus that justified states to impair interstate commerce, in violation of the Commerce clause of the Constitution was being replaced by a more “amorphous” standard of an “economic reality” impact of out-of-state sellers in states that sought to impose sales and use taxes.

Impact and Response to this “missile” on contact:

For most online sellers: a thermonuclear explosion…life will never be the same.

(Keep in mind that one of the largest online sellers, Amazon, recognized the future, and had already undertaken to collect sales tax in the 45 states that impose sales/use taxes, although most of its third party vendors have not.)

For direct sellers, who sell both online and offline:

More like momentary eclipse of the sun…back to business; they have already been collecting and paying sales/use tax for decades.

Actually, says direct selling, “thank you for leveling the playing field.”

And, as to all online sellers, whether direct sellers or not, “no thank you” long term for an expected flood of creative new state taxes that will develop over the next 20 years in our “virtual and gig” economy. This is just the beginning.

First, What Just Happened?

As summarized by the Court in its syllabus and majority and dissenting opinions:

Wayfair is a major online retailer of home furnishings. Although it has substantial sales into South Dakota, it has no physical presence in South Dakota. Until the Wayfair case, 50 years of court precedent prevented states from impairing interstate commerce, in violation of Commerce Clause, U.S. Const. art. I, § 8, cl. 3, by imposing a duty on out-of-state retailers who had no “nexus” with the state. And for the Supreme Court, “nexus” required physical presence. Two famous cases set the bright line mandate of physical presence: National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U.S. 753 (1967), and Quill Corp. v. North Dakota, 504 U.S. 298 (1992). Both National Bellas Hess and Quill involved interstate shipment from products ordered from catalogs.

It is estimated that these two cases caused South Dakota to miss out on $48 million to $58 million annually. And so, like many states, South Dakota sought to test the issue again, claiming that the Internet had changed things, i.e., we had a new economic reality of “nexus” that went beyond physical presence. Based on this half century standard, Wayfair refused to collect sales tax imposed by a relatively new South Dakota sales tax law that sought to impose sales tax responsibilities on out-of-state sellers who sold more than $100,000 in goods and services into the state or carried out more than 200 sales transactions.

Litigation followed, led by South Dakota requesting a declaratory judgment that its new tax was valid. Wayfair raised the long time defense of lack of “nexus” via physical presence. South Dakota lost at the trial court and State Supreme Court and requested review by the U.S. Supreme Court.

The states hit the jackpot. And it was the lucky day for the forty-one states, two Territories and the District of Columbia, all hungry for new taxes, who joined South Dakota to ask the U.S. Supreme Court to reject the test formulated in Quill. In 2017, the U.S. Government Accountability Office pegged the prospective increase to the states, if South Dakota won the Wayfair case, as being between $8 billion and $13 billion per year.

Read the full article here.

Visit us at www.mlmlegal.com to learn more.

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What is Stacking? - YouTube

A Conversation with Jeff Babener Video Series: Distributors who recruit spouses, children, just to qualify for the bonus program is considered stacking. Watch the video. And to learn more visit www.mlmlegal.com.

Watch the video.

For more information about the legal industry and MLM, visit MLMLegal.com.

Visit us at www.mlmlegal.com to learn more.

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