Legal Checklist

What should the New Professional know and consider as he or she decides to enter this industry and choose a particular network marketing company? Here is a brief legal background and a summary checklist of key issues that have been identified to aid the New Professional's "due diligence" process: In the entreprenurial sector, federal and state regulatory agencies have had an ongoing war under way with pyramid schemes, chain letters, and other forms of endless chains, lottery games, and ponzi schemes, all of which have posed as legitimate direct sales operations. These high-profile cases have often negatively influenced the public's perceptions of legitimate network marketing companies.

The SEC and the FTC defined early guidelines regarding illegal pyramids and other unlawful entrepreneurial chains in the legal court case of Dare to Be Great and Koscot Interplanetary Inc. (1973/1975)

Here is a checklist of key issues to use in evaluating network marketing companies on their legality and legitimacy:

Network marketing companies must be bona fide sales organizations that market bona fide products to consumers.

Products must have a real-world marketplace and realistic and intrinsic value measured by the price-quality relationship.

Product prices should be competitive and not inflated.

Compensation plans must not require or encourage "front-end buy-in" inventory loading by distributors.

Distributors should emphasize retail sales to nonparticipant consumers outside the network marketing organization. (Internal consumption is acceptable, but should not be the focus)

Compensation plans must not encourage or require mandatory purchases of peripheral/accessory products or services.

Compensation plans must not pay commissions to distributors for headhunting or recruitng where the emphasis is on recruiting rather than selling the product.

Sign up costs should be low, requiring no substantial cash investment. Sales kit should be at cost or near company cost to distributors.

Network marketing companies should not make any earnings representations unless those claims are based on a track record of sales performances.

Once you choose the company that's right for you, coupled with the tools available to you, network marketing stands alone as the greatest vehicle in the world for personal freedom, entrepreneurial success, and enhanced family life.

Good Luck!

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