Network marketing distributors sell products for MLM companies, and can earn money by recruiting others to do the same. They are self-employed and responsible for their own taxes and benefits.
A network marketing distributor is an independent representative of a network marketing company. Network marketing, also known as multi-level marketing or MLM, employs a marketing strategy that relies on independent distributors to sell its products or services. In addition to selling products in its own retail sales, a network marketing distributor is encouraged to develop a personal sales organization by recruiting additional distributors and helping those distributors to do the same. The MLM distributor then earns a percentage of the sales made by those in his sales organization, in addition to the retail profits on the products he sells to customers.
Becoming a network marketing distributor is usually just a matter of signing a contract and paying a distributor fee. A potential customer approaches or is approached by a network marketer who recruits the person into the company. The cost to become a distributor is generally minimal and the new distributor usually receives a distributor kit, which includes training materials and company literature. Some companies offer paid or free training to new distributors. In some states, however, it is illegal for a prospective distributor to pay any amount of money to join a network marketing company.
Once someone becomes a network marketing distributor, he or she can start buying the company’s products at a reduced or wholesale price, which can then be sold at a retail markup to customers. The difference between the wholesale and retail price becomes the profit. Some network marketing companies pay additional bonuses to distributors on retail sales. For example, a company might pay a 10% bonus on retail sales above a certain dollar amount in a given month. This bonus would be paid directly to the distributor by the MLM company. Each company has its own policy on paying commissions on sales to a distributor’s recruits. This policy is commonly known in the MLM industry as a compensation or marketing plan and usually involves paying a distributor a percentage of sales for various levels of recruiting.
Under the law, network marketing distributors are considered self-employed and are not entitled to the same benefits or protections as workers employed by a company. MLM distributors are responsible for paying their own taxes and Social Security, must arrange their own health insurance, and receive no sick leave or vacation. Distributors who violate company rules are subject to termination by the network marketing company and are not entitled to unemployment benefits. At the same time, a network marketing distributor enjoys many of the benefits of being self-employed, including tax deductions and being able to set their own hours without having to worry about producing their own marketing literature, sourcing products or having to rent or buy retail space to do business.
Asset Smart.
Protect your devices with Threat Protection by NordVPN
