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Multi-level Marketing Questions

What is a Multi-level Market?

A Multi-level Market or MLM is a type of marketing strategy where the company compensates the sales people for the amount of a product that they sell but also for what the people that they recruit sells. Multi-level Marketing is also known by many other terms such as; pyramid selling, network marketing, and referral marketing. The salespersons are tasked with selling the product directly to the customer by ways of relationship referrals and word of mouth. Although Multi-level Marketing companies have been the frequent subjects of criticism as well as lawsuits, the MLM companies are criticized for their similarity to illegal pyramid schemes, price fixing of the products, emphasis on recruiting other people, high start up costs, encouraging if not demanding that sales people buy and use the product themselves.

Can a person open a Multi-level Market online to sell lottery type services?

The lottery type system most likely would not work if the person is doing it in the United States or offering the services in the United States due to privet lottery systems being illegal unless it is a raffle by a non-profit organization.

Does a person who has been the representative of a Multi-level Market company have any legal recourse for being let go without any notice or reason?

The person may be able to take the company to small claims court and sue to regain the money that he/she has invested. Once this happens, the company will more than likely bring up the reason the person was let go as a defense to not be made to pay the money back. The person could also send a written demand to the company for the return of hi/her investment and use the suit as leverage to settle outside of court.

How many layers or managers can a person have in a Multi-level Market type company before it becomes a legal or administrative nightmare and is there a limit at which the person would need to register as an MLM/network marketer?

In most cases this is not a yes or no answer as well as it cannot be answered by a definitive number The following article will explain in further detail as to whether or not the company would be a Multi-level Market type company: http://www.mlmlaw.com/library/guides/Primer.htm

Is a Multi-level Market type company that offers a mailing list as the service illegal?

As long as the customer or member understand everything that is associated with this when he/she signs on then it is legal. The sales person would need to make sure that the member/customer fully understands what he/she is agreeing to before the deal or contract is closed.

Multi-Level Market type companies can be a easy way to make money or an easy way to lose money. When an opportunity comes up to be a part of or start a Multi-level Market type company, the person may have questions as to what is legal, what is not legal, and what is a legitimate type of investment. The Experts are available to assist with any questions that may come up concerning Multi-level Markets.

Ask a Business Lawyer

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Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements

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    Hello,
    I have a home based business in Colorado and rented a personal mailbox that has a physical address and listed it as my principle address for the business. I did this because I work from home and alone in a rural area and worried about safety. I discussed with an attorney before doing this and he said all was needed is a physical address for principal address. I do have a different address for registered agent. Please give me second opinion.
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    I am hoping you can help assist me in figuring out how the following paragraph in a purchase agreement actually impacts the buyer, in this case, me, in the purchase of a business in the City and County of San Mateo, State of California.
    I am purchasing a business in the City and County of San Mateo, State of California. The following paragraph is in the purchase agreement.
    I need clarification on what it means and how it could impact me.
    In addition to the purchase price specified in this Agreement, the amount of any present or future sales, use, excise or similar tax applicable to the sale of the Business will be paid by the Purchase, or alternatively, the Purchaser will provide the Seller with a tax exemption certificate acceptable to the applicable taxing authorities.
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    Ric
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    I'm trying to find out if I can use "imagination is more important than knowledge" by Einstein but just as a posted quote and for retail merchandise for sale in a museum?
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