Glossary

Network Marketing, (also known as direct selling) is the marketing and distribution of products or services directly to consumers in a face-to-face manner, away from permanent retail locations.

Multilevel marketing, which is commonly referred to as MLM, is a type of compensation plan found in direct selling. A network marketing company that offers a multilevel compensation plan pays its consultants based on the individual’s product sales as well as that of their “downline,” which refers to a group of people that consultants bring into a company to generate sales, their recruits, and so on.

Single level compensation plan is a structure in which a consultant is compensated based solely on his or her individual product sales.

Downline refers to a group of people that consultants bring into a company to generate sales, their recruits, and so on.

Upline refers to a consultant’s sponsor, along with his/her sponsor, etc.

Compensation Plan is a system that compensates consultants for their efforts and must be based primarily on the sales of products by the consultant and his/her downline. The level of earnings is often based on an achieved title or rank and is usually a percentage commission of sales. There are various types of compensation plans so it is important to fully understand how one will be compensated before joining a company.

Independent contractors perform work or services for an entity on a non-employee basis. Network marketing professionals are statutory non-employees, and are treated as self-employed for all Federal tax purposes, including income and employment taxes, if: 1) substantially all payments for their services as direct sellers are directly related to sales or other output, rather than to the number of hours worked; and 2) their services are performed under a written contract providing that they will not be treated as employees for Federal tax purposes.

Direct marketing is a method used to distribute advertising and marketing materials such as catalogs, brochures or other items to consumers through mail, e-mail, telemarketing or other methods. Network marketing/direct selling is NOT direct marketing.