Online one of the most common questions people ask when looking into a business opportunity online is “Is (Company Name) A Pyramid Scheme?“
In order to properly answer that question, you first need to understand fully what factors play into something being a pyramid scheme, and which factors do not. In this article, we are going to discuss what makes a company a pyramid scheme, and some common misconceptions about what people believe make a company a pyramid scheme.
What A Pyramid Scheme Is Not
A Pyramid Scheme is not as simple as saying it creates a triangle effect, where the only person who makes the most money is at the top. This would literally make every business that makes a profit, and every company where the CEO makes more money than the Employees a Pyramid Scheme. So this is a false perception. What could be said is that these companies are set up to keep the people at the bottom broke, and this is definitely not an ideal situation to be in, but it is not illegal, in fact, this is completely a legal and encouraged method of running your company in America.
MLM in most cases is also not a pyramid scheme because in order for it to be a pyramid scheme there cannot be any product or services being sold in the company. So most MLM’s are built around a particular product or service being offered. So unless the company is selling strictly the chance to make money with no product or service in the company then it is not a pyramid scheme.
What Is A Pyramid Scheme?
Pyramid schemes now come in so many forms that they may be difficult to recognize immediately. However, they all share one overriding characteristic. They promise consumers or investors large profits based primarily on recruiting others to join their program, not based on profits from any real investment or real sale of goods to the public.FTC – Pyramid Schemes – https://www.ftc.gov/public-statements/1998/05/pyramid-schemes
The above quote explains Pyramid Schemes to the T, and for the full description of what a Pyramid Scheme is you can visit the link sited underneath the article.
The biggest thing to look for is how long the business has been in business as well, like the FTC, and other government entities have been working frivolously to shut these schemes down as quickly as possible. So, if a business has been in business for years, and has legitimate products or services then even though it may have a compensation plan that is designed to keep the people at the top rich while the people at the bottom keep losing out that does not make the company an illegal pyramid scheme, it does, however, make the company greedy and unethical. Sadly, being greedy and unethical does not break any laws.
Just because something does not pay well for people working hard, or you lose your money buying into the business, and not making any money does not make it illegal. When you are looking into a business opportunity you need to do your due diligence and look into the company, and business opportunity before deciding to join it. Look for reviews, look for reports on sites like the Better Business Bureau, The FTC…etc. Do not trust reviews you see on Google at face value, search for the company on sites that are legitimate, and looking out for your best interests as a consumer.
There you have it, Did this article help you to better understand what a pyramid scheme was? Do you agree with what makes it a Pyramid? Share your thoughts below I would love to hear from you!