Any search for making money online is sure to bring you a slew of scams in business. People tend to trust that if it is on the Internet and has a nice site, it must be a legitimate business and a real company. That trust mixed with the optimism of someone looking to earn some income online can lead to big mistakes and possible fraud. Not all businesses online are legitimate ways to make money. Some of these are in fact illegal. They may not have been shut down yet, but authorities are starting to clean up fraud on the Internet and then these businesses will be in trouble. The problem is that the people involved may also be in trouble.
Besides the legal issues, people involved in pyramid or illegal MLM businesses may lose a lot of money. According to Internet National Fraud Watch Information Center, in 2005 Work At Home Plans presented an average loss of $1785.00. People under the age of 30 (44%) were victims of loss from Work At Home Plans.
How to tell if the business is a scam:
Pyramid Schemes
There is a promise of extremely high income in a short period of time.
A pyramid scheme depends on making money from new members.
You make money when you recruit another person or a specific number of people and they pay into the pyramid.
The majority of income made is from the investment of membership and new recruits
There is no product or service being sold.
The money you invest may be called a “gift” or “loan” (a loop-hole they think will protect them from legal issues).
MLM Schemes
There is a promise of extremely high income in short period of time.
Typical or average member’s incomes are not disclosed.
Members invest money and make money mainly or solely from recruiting new members.
If you have not recruited anyone you don’t make money.
There may be a product or service being sold but it is only or mainly sold to members.
The product or service has an inflated price.
Members are required to buy overpriced or a large quantity of inventory.
Legitmate MLM (note some Countries have different definitions of what is illegal):
There is a definite value in the product being sold.
You can make money by just selling the product.
The majority of money comes from sale of the product.
The product is sold to people outside of the membership.
Even though you can make money from a down-line (or recruiting members) it is not essential to making money.
Enticements that may be used by some or all schemes Pyramid and MLM:
Many people involved with the business try to recruit by posting comments on forums, blogs. They also recruit by pretending to be a scam watch site, when in fact they are merely trying to get people into the business. They may advertise to appeal to people trying to avoid scams.
This intel first appeared on: http://makemoneyhonest.blogspot.com/2008_04_13_archive.html
