What is the difference between an MLM and a pyramid scheme?
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It is a spectrum. An MLM business makes money in two ways:
A) selling product
B) recruiting new people
If you join the company, and all of your earnings come from “B”, then you are in a pyramid scheme. If all of your earnings come from “A”, you are not in a pyramid scheme, though you are also probably not in an MLM.
The higher the percentage “B” represents of your total income, the more likely it is that you are part of a pyramid scheme. Remember that income from “B” will always become zero eventually, so unless there is enough “A” then there will be a collapse.
I would say that if more than 20% of your income comes from recruitment, it is a pyramid.
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