When people hear the words multilevel marketing or network marketing, many who are not familiar with the industry instantly think "pyramid scheme". Over the the years the US government has developed a checklist, based on numerous court cases, that can help sort out the difference.

Here is the checklist. It was taken from an article on Legitimate MLM's written by an attorney named Jeffery A. Babener.

Legitimate MLM Checklist

1. Product and Price

2. No Investment Required

3. Purchase and Inventory Requirements

4. Sales Commissions Sources

5. Buy-Back Policy

6. Retail Sales

7. Active Role for Distributors

8. Earnings Misrepresentations

9. Good Training

If you take this list and begin to understand it, you will see that a legitimate MLM company has some fairly simple things that stand out. The first is a product that is proprietary, has research behind it, is appropriately priced, available for the public to purchase at retail (from a distributor), and has a satisfaction guarantee. If you're presented with a business opportunity and the product does not fit these parameters, be concerned.

Secondly is the investment. A legitimate network marketing company will require you to enroll and purchase a start kit and some initial sales materials or sample. If anyone asks you for a LARGE upfront investment, it's time to walk (or run) the other way.

A legitimate MLM will not require you to purchase large amounts of inventory and will frown on inventory loading purely to increase commissions. Again, if the amount of pressure and money seems extreme, it probably is. In addition, as you review the compensation plan, you should see commissions coming from the sale of the product (retail or cost), not purely from recruitment of other distributors. This can get tricky in that by definition network marketing is the development of a "network" of distributors who market and sell a product. So you will need to build your organization and recruit others to do the same. However, commissions and bonuses should be based primarily on product sales and volume.

The continuation of this thought process is in the area of retail sales. Distributors should be encouraged by the company to sell the product to people outside of the organization (retail sales) as well as enrolling people to purchase the product at a discount (preferred customer). As for the people you do enroll into your network, distributors are to be encouraged to actively work,whether it's supervising and training their team or actively selling the product.

Legitimate network marketing companies accurately represent the earnings on all levels of their compensation plan and provide good, thorough, ongoing training to their people.

Network marketing has recently come out from the shadows. It has been called the best way to make money relatively fast, by the Harvard Business Review. Millions such as Donald Trump and Robert Kiyosaki have endorsed it and suggest that is a valid and viable business model for the 21st century. According to Mark Yarnell, who is a long-time network marketing guru, network marketing is the only true equal opportunity industry. A high school graduate with no business experience can become a millionaire. It's a matter of determination, commitment to goals, seeking out training and the ability to stay on course and not discouraged. Network marketing is not a "get rich quick" business. You must work. But your work will be rewarded consummate to the level of energy you put in.