Most people often mistakenly lump Multi Level Marketing (MLM), Network Marketing, Affiliate Marketing, Ponzi Schemes and Pyramid Schemes together as one big group of scams.

In reality, network marketing, MLM, and affiliate marketing are different and usually legitimate business opportunities.

Whereas Ponzi Schemes and Pyramid Schemes are illegal scams designed to make the person or people at the top rich and rip off everyone else.

In the MLM industry, a person still has to be careful in choosing an opportunity to join.

Not all businesses are designed the same and not all contracts and policy and procedure are created equally.

It is vitally important that a person understand what makes a company a strong business opportunity for the distributors. 

At Mentoring For Free, we use the Five Pillars and the $10,000 Question to measure an MLM company’s strength.

Whatever yardstick you use to evaluate your company or a company you are considering joining, you must understand what would make it a scam.

How To Identify A Scam

An Attorney General would ask these two questions:

1. Would a logical thinking person pay this much money for the product or service if there was not a business opportunity involved?
2. Does the income stop when the recruiting stops?

If the answer to the first question is “No” and/or the answer to the second question is “Yes”, then it is a scam.

The word SCAM
brings up Ponzi schemes and Pyramid Schemes.
They are similar and different.

A Ponzi Scheme usually targets more affluent people referred to as “investors”.

A Pyramid Scheme targets more of the blue collar section of society.

They are both illegal and designed to rip people off while making the guy(s) at the top rich.

Rod Cook of MLM Watch Dog wrote an excellent article about Ponzi Schemes and Pyramid Schemes.

Take the time to read it here: Pyramids and Ponzi Media Reporters.  At the end of the article is some interesting history about Carlos Ponzi.

As Rod says, “A good MLM provides goods or services that a consumer would buy if an income opportunity were not included!”

Believe In Your Success, I Do!
Karen
mentor.karen.j.miller@gmail.com

Anyone been scammed by a Ponzi Scheme or Pyramid Scheme?

The United States Internal Revenue Service and Treasury Department have finally brought some form of financial relief to people who have been scammed by Ponzi-Type Schemes.

If you or someone you know have been scammed, consult a tax accountant to see if you qualify for the tax relief.

Following is an excerpt from the IRS Site explaining how the tax relief works…

• The investor is entitled to a theft loss, which is not a capital loss.  In other words, a theft loss from a Ponzi-type investment scheme is not subject to the normal limits on losses from investments, which typically limit the loss deduction to $3,000 per year when it exceeds capital gains from investments.
• The revenue ruling clarifies that “investment” theft losses are not subject to limitations that are applicable to “personal” casualty and theft losses.  The loss is deductible as an itemized deduction, but is not subject to the 10 percent of AGI reduction or the $100 reduction that applies to many casualty and theft loss deductions.
• The theft loss is deductible in the year the fraud is discovered, except to the extent there is a claim with a reasonable prospect of recovery.  Determining the year of discovery and applying the “reasonable prospect of recovery” test to any particular theft is highly fact-intensive and can be the source of controversy. The revenue procedure accompanying this revenue ruling provides a safe-harbor approach that the IRS will accept for reporting Ponzi-type theft losses.
• The amount of the theft loss includes the investor’s unrecovered investment – including income as reported in past years. The ruling concludes that the investor generally can claim a theft loss deduction not only for the net amount invested, but also for the so-called “fictitious income” that the promoter of the scheme credited to the investor’s account and on which the investor reported as income on his or her tax returns for years prior to discovery of the theft.
  Some taxpayers have argued that they should be permitted to amend tax returns for years prior to the discovery of the theft to exclude the phantom income and receive a refund of tax in those years. The revenue ruling does not address this argument, and the safe-harbor revenue procedure is conditioned on taxpayers not amending prior year returns.
• A theft loss deduction that creates a net operating loss for the taxpayer can be carried back and forward according to the timeframes prescribed by law to generate a refund of taxes paid in other taxable years. 

This is great news for those of us in legitimate Network Marketing companies.

The government is standing up for the consumer, or distributor, and beginning to make it clear that fraud in this industry will not be tolerated. 

This is the second of a three part series in making money fast scams.  The first post was on Chain Letters.

When money is tight and we have bills to catch up on or there are nicer things we would like to buy, we often search for easy and quick ways to make some extra cash.

The internet, and sometimes people we know, offer a multitude of opportunities for making money with “no experience necessary”.

Some of those opportunities are legitimate, while some are scams intended to part you with your money.

Pyramid Schemes and Ponzi Schemes
Seductive Offers of a High Rate of Return in a Short Time Span

The term “Pyramid Scheme” has a long standing reputation of being a scam.

The problem is that most people don’t know how to tell if an opportunity is a pyramid scheme or a genuine business opportunity, so many people get sucked in.

Pyramid Schemes and Ponzi Schemes are both similar and both illegal.

Both make extravagant claims for huge earnings in a short timeframe.
They both rely heavily on recruiting new affiliates.

A Pyramid Scheme has a product to sell, but relies on the members within the organization to buy the products. This is often a huge monthly quota my mentor, Hugh, calls “filling your garage.”

There are also no retail sales to the general public.

A Ponzi Scheme only recruits new members. There are no products or services offered. There are no commissions paid for recruiting new members.

The promotor just collects the sign up fee and pays it to the upline.

“Both pyramid and Ponzi schemes are illegal because they inevitably must fall apart.
No program can recruit new members forever.
Every pyramid or Ponzi scheme collapses because it cannot expand beyond the size of the earth’s population.
When the scheme collapses, most investors find themselves at the bottom, unable to recoup their losses.”
(http://www.ftc.gov/speeches/other/dvimf16.shtm)

Legitimate Network Marketing, or Multilevel Marketing, businesses should not be confused with Pyramid or Ponzi Schemes.

A genuine MLM business offers a product or service and generates retail sales to the general public.

Believe in Your Success, I Do!
Karen
mentor.karen.j.miller@gmail.com

Many people may be wondering why an ordinarily intelligent woman would choose to get involved in network marketing.

Isn’t network marketing a scam?
Isn’t network marketing a pyramid scheme?
Don’t you have to bother all of your friends and family?
Don’t only the top 3% ever make those big incomes?

Well, the answers to these questions are yes and no.
It all depends on the company you’re involved with, how your sponsors treat you, and the quality & scope of the training they provide.

Let me assure you, I am an intelligent woman and I do know what I’m doing.
Let me share with you some of what I learned about Network Marketing {aka Multi Level Marketing, MLM, Affiliate Marketing, Direct Sales}.

First thing that I learned is that you have to do your research.
You need to…
…understand the Network Marketing business model;
…understand how Network Marketing fits into today’s financial climate;
…understand if Network Marketing is for you.

Next, you have to know what you’re doing when choosing the company you want to be affiliated with.

This is where many of us fail miserably.
We get captivated by the glitz and hype, usually delivered by well meaning people.
People who are just like us…everyday, average working folks who are looking to make extra income from home…and some who are realizing the American Dream of making a full time income from their home-based business.

We are told that “anyone can do this”, “all we have to do is make a list of 100 friends & family”, “pick up the phone”, “just listen and talk to people”.

Yeah right. It didn’t work too well for me, either.

Do you get mad at your sponsor and blame them for your failure?
After all, they are simply training us the same way they were trained.

Do we get mad at ourselves and blame ourselves for being miserable, unteachable failures?
After all, when we are not successful at this, we are told we are not trying hard enough, or some other excuse.

The truth is…It’s not your fault!

Trying to work your way through all of the companies and pitches and training programs can make your head spin,not to mention max out your credit cards!

Fortunately, I found help right when I needed it.

A good friend of mine introduced me to Mentoring For Free.

Mentoring For Free was founded by Michael Dlouhy to give back to the industry….Michael’s mission is to fight the scammers and help fellow Network Marketers learn the skills necessary to be successful.

Let’s face it, Network Marketing is a business.
We need to change our mindset and start treating it as a business.
We need to start treating ourselves as business professionals.

Whether you are a doctor or a ditch digger, you need real training for your profession.
It is no different for Network Marketers.

I have received the training and learned skills that have helped me build my business.
I am now also giving back to the industry by being a mentor and coach to fellow network marketers.

I am happy to offer you the same help I received.
Join me in a training program that is completely free.
Join me in a training program that will change your life.

You can start here by downloading my free eBook, Success In 10 Steps.