Got a New Home Business Opportunity? Make Sure It Isn't a Pyramid Scheme First
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Got a New Home Business Opportunity? Make Sure It Isn't a Pyramid Scheme First

The difference between a pyramid scheme and a legitimate opportunity is in sales, not recruitment

August 10, 2025

Working from home sounds ideal, but before you sign up as a “consultant” or distributor, be sure you’re joining a legitimate multilevel marketing (MLM) company, not an illegal pyramid scheme. In North Carolina, the line between the two can blur, so always vet opportunities carefully. While MLMs are legal when focused on retail sales, pyramid schemes rely on constant recruitment and typically collapse, leaving participants with losses.

Recognize the Red Flags

  • Recruitment over retail: If most of your earnings come from recruiting new distributors rather than selling to outside customers, it’s likely a pyramid scheme.
  • High upfront costs: Excessive “starter kits,” inventory buy-ins, or training fees can leave you in debt before your first sale.
  • Inflated income claims: Watch out for promises of large payouts with minimal effort. If it sounds too good to be true, it probably is.
  • Opaque compensation plan: Legitimate MLMs clearly explain how bonuses and overrides are calculated; confusing charts often hide recruitment-based rewards.
  • Inventory loading: If you’re pressured to buy more product than you can realistically sell, step away.

Questions to Ask Before You “Buy In”

  1. How long has the company been in business, and where is it headquartered?
  2. What percentage of sales comes from retail customers versus internal distributors?
  3. Can you see documented average earnings (not just top-earner testimonials)?
  4. Does the company offer a clear buy-back or return policy for unsold inventory?
  5. Are its products competitively priced compared to retail alternatives?

Top North Carolina Resources

  • NC Attorney General’s Consumer Protection: File complaints or verify business practices at ncdoj.gov/complaints or call 1-877-566-7226.
  • Better Business Bureau of Eastern/Western NC: Check accreditation and complaint history at bbb.org/wnc.
  • FTC Consumer Information: Read official guidance on pyramid schemes at consumer.ftc.gov/MLM.
  • NC Secretary of State Business Registration Search: Confirm whether the company is registered to operate in North Carolina at sosnc.gov/business_search.

Protect Yourself

  • Do your homework: Research the company’s registration with the NC Secretary of State and check for past enforcement actions.
  • Seek independent reviews: Look for forums or social media groups of current and former distributors to learn from real-world experiences.
  • Consult a professional: Talk to an accountant about the tax implications of inventory purchases and earned commissions.
  • Trust your instincts: If the emphasis is on recruiting friends and family rather than selling products you value, walk away.

Quick Reference: Pyramid Scheme vs. Legitimate MLM

  • Pyramid Scheme: Primary income from recruiting new members. Legitimate MLM: Primary income from selling to outside customers.
  • Pyramid Scheme: High-pressure recruitment of friends and family. Legitimate MLM: Recruitment is optional, with focus on retail sales.
  • Pyramid Scheme: Excessive buy-ins or large starter kit costs. Legitimate MLM: Low-cost starter kits with no large inventory requirement.
  • Pyramid Scheme: No clear buy-back or return policy. Legitimate MLM: Reasonable buy-back policy for unsold products.
  • Pyramid Scheme: Overpriced, noncompetitive products. Legitimate MLM: Products priced in line with similar retail items.

At best, most MLM participants earn only a modest side income; at worst, they lose money and risk legal entanglements. By asking the right questions, using NC-specific resources, and understanding the differences between pyramid schemes and legal MLMs, you can protect yourself and pursue only genuine opportunities that align with your goals.