Businesses that involve selling products to family and friends and recruiting other people to do the same are called multi-level marketing (MLM), network marketing, or direct marketing businesses. Some MLMs are illegal pyramid schemes.

How are MLMs not pyramid schemes?

The difference between a pyramid scheme and a lawful MLM program is that there is no real product that is sold in a pyramid scheme. Participants attempt to make money solely by recruiting new participants into the program.

Is MLM always a pyramid scheme?

Some sources say that all MLM companies are essentially pyramid schemes, even if they are legal. The U.S. Federal Trade Commission (FTC) states: "Steer clear of multilevel marketing plans that pay commissions for recruiting new distributors. They're actually illegal pyramid schemes.