Knowing how to choose a network marketing company can save you money and stress. The company you pick determines what you sell, what you pay, how you are compensated and how much legal and reputational risk you take on. This due diligence checklist walks you through the questions to ask and the documents to read, using guidance from the FTC and the Direct Selling Association, so you decide based on evidence rather than a recruiter’s enthusiasm.

Step 1: Judge the Product First

Would you buy this product at this price if there were no business opportunity? Compare ingredients, quality and price to similar products in stores. If the items are overpriced and sell mainly to the representatives themselves, that is a warning sign. A healthy company has real retail demand from outside customers.

Step 2: Read the Compensation Plan

Obtain the written plan and ask what portion of pay comes from retail sales versus team recruiting or purchases. Check qualification requirements, such as monthly purchases or personal volume. Our article on MLM compensation plans explained describes the main structures, and compensation plan red flags lists warning signs.

Step 3: Study the Income Disclosure

Read the company’s latest income disclosure statement. Look at the median earnings, the share of participants earning nothing and whether figures are before or after expenses. See how to read an income disclosure statement. If the company does not publish one, ask why.

Step 4: Understand the Costs and the Exit

List all costs: starter kit, monthly minimums, training, events and tools. Ask for the buyback policy in writing, including how much you can recover and for how long. Many DSA member companies repurchase unsold inventory under a code of ethics; check the MLM buyback policies guide and the DSA’s code.

Step 5: Check the Company’s Record

Search the company name with ‘FTC’, ‘attorney general’, ‘lawsuit’ and ‘complaints’. In 2026 the FTC and Washington state secured a $225 million order against Amway and two affiliates, and the FTC announced an order against Forever Living in April 2026. A past action does not automatically make a company unsuitable, but you should read what was alleged and what has changed. See the Amway FTC settlement.

Step 6: Evaluate the Leadership and the Upline

Who runs the company and how long has it operated? Is the sponsor transparent about results and costs, or do they use hype, screenshots and urgency? Ask your sponsor for their own net income after expenses. Honest sponsors will not mind questions. Walk away from anyone who pressures you.

Step 7: Run the Numbers for Yourself

Estimate your costs and the sales needed to break even. If it requires recruiting several people to cover your expenses, reconsider. Use our research checklist to document your answers, and set a spending cap before you start.

Questions to Ask Your Sponsor

Prepare a list before any meeting. Ask: How long have you been with the company and what is your net income after expenses? How many hours a week do you spend? What did you spend in your first six months? What percent of your sales go to customers outside your team? What happens if I want to quit in the first 90 days? Can you show me the written buyback policy? Honest answers are valuable even when they are unflattering. Vague answers, pressure to decide quickly or reliance on testimonials rather than documents are signs to slow down and verify.

Warning Signs That Should Make You Pause

Be careful if you hear that you can replace your job quickly, if you are told to buy large amounts of inventory to qualify, if training and event purchases are presented as essential, or if the main message is about recruiting rather than products. The FTC’s alleged findings in recent cases involved exactly such practices, including pressure to buy hard-to-sell products and misleading earnings claims. If any of these appear, ask for the policy in writing, take time to think and consider alternatives such as a conventional small business.

Keeping Records From Day One

If you join, keep every receipt, order confirmation, bank statement and earnings report. Record each sale with the customer, date and amount. Save screenshots of claims made to you by your sponsor. These records help you calculate your true profit or loss, support tax filings and, if something goes wrong, help you pursue a refund or complaint. Review your numbers monthly against the spending cap you set before joining, and be willing to stop if the results do not justify the cost.

Your Decision Checklist

• Product worth buying on its own
• Written plan and disclosure read
• Costs and buyback understood
• Regulator records checked
• Sponsor honest and transparent
• Budget cap set
• Plan to review after 90 days

If most answers are yes, you can proceed carefully. If several are no, consider a different opportunity or a conventional small business; see home business ideas for alternatives.

Key Takeaways

• Judge the product first.
• Read the plan, the disclosure and the buyback policy.
• Check regulator records.
• Run your own numbers.
• Set a spending cap and review after 90 days.

Frequently Asked Questions

What is the most important factor?

Whether real customers buy the product at its price without the opportunity attached.

Should I trust a company because it is DSA-registered?

Membership signals a code of ethics, but still verify the plan and disclosures yourself.

Are all MLMs scams?

No. Legal direct selling exists, but results vary and most earn little.

Where can I find complaints?

The FTC, your state attorney general and the Better Business Bureau.

Sources

• FTC: Business Guidance Concerning Multi-Level Marketing
• FTC consumer advice: Multi-Level Marketing Businesses and Pyramid Schemes
• AARP Foundation MLM Research Study (2018)
• DSA: Code of Ethics
• Npros News: Judge enters Amway $225 million FTC settlement (Oct 13, 2026)

QastMe does not endorse any company. Information is for education only and is not financial or legal advice. Earnings in direct selling vary widely, and most participants earn little or no money. Review each company’s income disclosure statement before deciding.

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