Things get sticky when an MLM network compensates participants primarily for recruiting others rather than for selling the company's products or services. An MLM system in which most of the revenues come from recruitment may be considered an illegal pyramid scheme.

Since multilevel programs are usually exempt from business opportunity regulation and are not defined as franchises under state and federal franchise laws, you will need to do your own investigation before investing any money.

Excerpted from Start Your Own Business: The Only Start-Up Guide You'll Ever Need