to start a network marketing business

smitha (Querist) 18 October 2009 This query is : Resolved
dear sir,

I am a housewife from trivandrum and I had completed my Degree. I wish to start an MLM marketing, ie. I market a product of Rs.20/-and distribute that product to 5 persons by accepting a commission and that 5 persons refer another 5 persons each like that, by accepting the commission. I want to know is this marketing legal or not. I am willing to pay tax for this. Kindly give me advice about this,that I continue this type of marketing or not.

smitha

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Prakash Yedhula (Expert) 18 October 2009
Multi-level marketing itself is legal, but there have been many instances of MLM systems that have gotten into trouble by resorting to fraud and false advertising. For example, illegal pyramid schemes are multilevel programs wherein people pay an entrance fee for the sole opportunity to recruit others to do the same, but generally have no product for sale at the bottom of the pyramid.

However, to my understanding the Madras High Court has ruled in 2005 that MLM itself is illegal under the Prize, Chits & Money Circulation Scheme (Banning) Act 1978

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smitha (Querist) 18 October 2009
dear sir,
thanks for your valuable advise.
then the same thing is doing amway and someother companies is it legal? and why the government is not taking any action aganist them actualy i don't want to cheat anybody just to start a business like the same way .

joyce (Expert) 18 October 2009
Smitha, I just advice you to not fall in the pit of doing MLM business, its just traping the people cleaverly. This sort of business only works in foreign countries as they work well with it, this sort of business is not suitable amoung the indian. Even I agree with the suggestion stated by Y. Prakash, hope he also got an experiance of it.

Adinath@Avinash Patil (Expert) 18 October 2009
MLM IS LEGAL.

adv. rajeev ( rajoo ) (Expert) 19 October 2009
MLM is legal but chances of loosing a money is more.initial stage it is very attractive and will get money but when it is go on then loss.

KUMAR JAGADEESAN (Expert) 19 October 2009
As advised by learned friends MLM per se is not illegal. Please ensure that you have a genuine product and the prices offered is commensurate with market rate for similar products.Take registration under shops, and establishments act ,sales tax act (VAT)and other applicable acts in order to establish the seriousness of the business. There is a RBI alert on opening of accounts by banks for multilevel marketing agencies and therefore ensure you follow the rules strictly
J.KUMAr
Hyderabad

PJANARDHANA REDDY (Expert) 19 October 2009
FOR SMALL PLAYERS WITH MUCH EXPOSURE IN THE SOCIETY MLM SCHEMES ARE MONEY SPINDLE NET WORKS. THE BEST EXAMPLE IS YOU WILL BE USED BY UR UPPER LEADER AS SUGARCANE. IF YOU WANT TO RAECH SUCH LEVEL YOU HAVE TO WORK ON MEN AND MONEY.

HENCE PLS TAKE THE ADVICE OF EXPERTS. I WIIL GIVE ONE MAIL u can contact. value4value@gmail.com