Business Opportunities are strictly regulated in 23 states; but at the same time, the majority of the traditional MLM income opportunities currently available are NOT Business Opportunities, either by definition, or by exemption.
WHY NOT? All 23 states have a threshold dollar amount, BELOW WHICH their laws are not applicable. The legislative intent was not aimed at the Avon Lady or the Amway Distributor, but rather at the vending machine routes and the chinchilla farms. The threshold dollar amount varies between $200 and $500 and, in its most common application, applies to the required purchases to participate in the opportunity. Now you know one reason why the cost to join most direct selling income opportunities is often zero, or a modest amount.
It has been my experience that 95% of direct sellers using a multi-level form of compensation, position their “income opportunity” offer to prospects so that the cost to join is below the thresholds of the “Business Opportunity” Statutes. If distributors are required to pay more than $200 to participate in the income opportunity, the Business Opportunity threshold has been exceeded in some states.
BUT – I have had occasion to look deeper into the meaning of “cost to join” and have found some “Gotchas.” In 12 of the 23 states the money required to be paid at the onset is the measure. HOWEVER, in the other 11 states the measure is the amount paid at the onset AND the amount paid over the first six months. So knowing the threshold amounts in the 23 states is not enough. In the following states, CA, GA, IA, LA, ME, MI, MD, SD, OK, TX & UT, various forms of the following quotes are used: . . . obligated to pay prior to or within six months . . . . . . obligated to pay within six months . . . . . . obligated to pay before, at the time of, or within six months . . . . . . or during the following one hundred eighty days . . . . . . single payment, or consecutive six month period . . . . . . anytime before the date of sale to anytime within 6 months after the date of sale . . . . . . commencing or ending six months . . . . . . requiring payment commencing operations to within six months . . .
So what is the lesson or the point here? Simply knowing the threshold amounts by state is not enough. Are you also subject to a six month “Gotcha?” Ask your legal advisor. The repercussions can vary from a warning phone call or letter to a “Cease & Desist” notice.