Full access to Entrepreneur for $5

On the Level

How to set up a multilevel marketing plan

Opinions expressed by Entrepreneur contributors are their own.

Business Start-Ups magazine, April 1999

Q: I've found a fantastic product with sole source rights in the United States and Canada. I'm looking to set up a direct (multilevel) marketing plan. Where do I get the necessary information to properly and legally do so?

A: Michael Sheffield, president of Sheffield Resource Network, a Tempe, Arizona, management consulting and product sourcing company for the direct-selling industry, says start-up steps and costs include registering with various states; trademarking your business and/or product; buying or manufacturing your products; maintaining inventory; designing packaging; developing a distributor kit and materials; hiring a staff; and advertising.

Four states--Wyoming, Massachusetts, Louisiana and Georgia--require multilevel companies to register prior to starting operations, says Kevin Grimes, an attorney with Grimes & Reese PLLC in Idaho Falls, Idaho. For details, contact the secretary of state or the attorney general's office in those states.

If you plan to do business in more than one state, consult an attorney about foreign corporation statutes--state laws that require you to register as a foreign corporation if you do business in a state outside the one in which you're incorporated. An attorney can also tell you if you need to collect and remit sales tax to the various states. Last but not least, you should have an attorney or other qualified expert review your distributor-compensation plan to ensure it's in order.

The following organizations can offer additional information:

  • Multi-Level Marketing International Association(http://www.mlmia.com) is a nonprofit trade organization for the network-marketing industry. Call (949) 854-0484.
  • Direct Selling Association(http://www.dsa.org) is a national trade association for companies that manufacture and distribute goods and services sold directly to consumers. Its Web site includes industry facts and a code of ethics for the industry. Call (202) 293-5760.

Contact Source:

Grimes & Reese PLLC, (208) 524-0699, http://www.mlmlaw.com