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MLM Compensation Plans & Compliance

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If you are thinking of opening a direct selling company, and you don’t have a compensation plan yet, then you may want to seek out the instruction of a compensation plan expert developer. Plan on having an MLM expert attorney review and approve your compensation plan. It is difficult to develop and verify your own plan, unless you are a mathematical whiz kid. I defer to those experts who create, test and tweak compensation plans. These compensation plan experts will save you time, money and late difficulty.

Whatever you do, don’t wait to have them review your compensation plan. You must be open to the thought that your plan may not be perfect, and that it can use a few suggestions on how to make it legally sound. Listen to your attorney and play by the rules from the beginning. It will make life in the industry so much easier in the long run. Their job is to protect you, let them.

During the Needs Assessment performed with each new client, it is surprising to see that some companies do not even have their compensation plan in a long version, written out with definitions. Other companies have developed their own compensation plans from scratch and in some cases, compensation plans are borrowed from other companies. It is not smart to “borrow” another company’s compensation plan. This can be extremely problematic since there is no initial knowledge of why the plan was developed, how the payouts were calculated, or how the plan even works.

Your compensation plan should be written in a narrative form with definitions so that your MLM expert Attorney can thoroughly review it in its simplest form. You should include all the graphs and charts necessary to explain the compensation plan in specific detail. The compensation plan blueprint should also include definitions for each term included in the compensation plan, such as what you call your Distributors, how they enroll customers and any requirements to earn commissions. Be sure to find someone that has developed more than a handful of compensation plans and is qualified to advise you of any required revisions. Please refer to the resources section of this book for my professional recommendation of an expert compensation plan developer.

The worst-case scenario would be your plan pays out too much which could result in the company falling victim to an untested plan. You never want to find yourself in the position of paying out too much in commissions because of programming errors. I recommend comprehensive Compensation Plan modeling to test the software well BEFORE you open the doors. Some plans have been modeled once the business is up and running; but this poses a more complex issue which is why you should consult with a compensation plan expert developer and software specialist in advance of rolling out the plan for the real-life test.

Do not let just anyone see your compensation plan until the final version is approved by an MLM expert attorney. As objective as they may promise to be, Distributors should not see your plan until it is finalized and approved by your expert MLM Attorney. No matter how hard they try; they may have a reason why they want to change your entire plan to the binary, manipulating it to their benefit, with them at the top to benefit the most.

Your compensation plan will require the proper legal disclaimers because a lack of one will alert regulators to the fact that it was never reviewed or approved by an MLM expert attorney.

Thank you,

Donna Marie Serritella

The Queen of Compliance

Let's talk about your compliance needs. Get in touch with me here.

Get a copy of my book here.

About the Author

For years, Donna Marie has worked, consulted, and published works with some of the most recognized Direct Selling Professionals;

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