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A network marketing distributor is an independent representative of a network marketing company. Network marketing, also known as multi-level marketing or MLM, employs a marketing strategy that relies on independent distributors to sell its products or services. In addition to selling products on his or her own retail sales, a network marketing distributor is encouraged to develop a personal sales organization by recruiting additional distributors and to assist these distributors in doing the same. The MLM distributor then earns a percentage of the sales made by those in his sales organization in addition to retail profits on the products he sells to customers.
Becoming a network marketing distributor is often a matter of just signing an agreement and paying a distributor fee. A prospect approaches, or is approached by, a network marketer who recruits the person into the company. The cost to become a distributor is usually minimal and the new distributor typically receives a distributor kit, which includes training materials and company literature. Some companies offer either paid or free training to new distributors. In some states, however, it is against the law for a prospective distributor to pay any amount of money to join a network marketing company.
Once someone becomes a network marketing distributor, he or she can begin purchasing the company's products at a reduced or wholesale price, which can then be sold at a retail markup to customers. The difference between the wholesale and retail price becomes the earnings. Some network marketing companies paydistributors additional bonuses on retail sales. For example, a company may pay out a 10% bonus on retail sales of over a certain dollar figure in a given month. This bonus would be paid directly to the distributor by the MLM company. Each company has its own policy for paying commissions on the sales of a distributor's recruits. This policy is frequently usually known in the MLM industry as a compensation or marketing plan, and typically involves paying a distributor a percentage of the sales for multiple levels of recruits.
Under the law, network marketing distributors are considered to be self employed, and are not entitled to the same benefits or protections as workers who are employed by a company. MLM distributors are responsible for paying their own taxes and Social Security, must arrange for their own health insurance, and do not get sick leave or vacation time. Distributors who violate company rules are subject to termination by the network marketing company, and are not entitled to unemployment benefits. At the same time, a network marketing distributor enjoys many of the benefits of self employment, including tax deductions and being able to set their own hours, while not having to bother with the production of his or her own marketing literature, sourcing products, or having to rent or buy a retail space in which to do business.
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