Pyramid schemes are illegal in many states, if you are participating in a pyramid scheme, you may find you may be on the wrong side of the law if your state has outlawed the pyramid scheme. Many multi level marketing plans are seen as a pyramid scheme because they promise new recruits a residual income on the sales made to their downline. This distinction defines the difference between a pyramid scheme and a legitimate multi level marketing plan.

With the advent of the internet, a new arena of multi level marketing activity has been allowed to flourish. The basic idea, of recruiting new members and being paid for selling product to them while promising them an income of a residual nature so they can sell that same product to their own downline is what this is all about.

Whether it is on the Internet or face to face, this defining attribute is what defines a pyramid scam from a legitimate multi level marketing opportunity. A legitimate multi level marketing opportunity, whether it is on the Internet or not, is defined by the fact that the recruits are solicited to purchase the products.

The FTC cite one of the reasons why the pyramid business model has become notorious and de-legislated in many states, is because the originators of the pyramid scheme typically make the majority of the money while the members building their downlines typically run out of available recruits, causing a collapse of the whole system.

It is not my intention here to dissuade or encourage from choosing the multi level marketing model as there are many legitimate and successful multi level businesses in operation. However, it is important to understand, when launching into a new career or building websites, where you stand legally in your state.

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