Ask the Law Mother-Do I Need a Business Entity to Run My MML Business?

It looks like I struck a nerve last week with my blog post on multi-level marketing (MLM)  plans.

I received several questions, including this one from Lynn in Flower Mound: “I bought into a MML plan last year. The company has been pushing me to form a business entity to run my business. This seems like a lot of hassle and expense, especially considering I am still trying to recoup my original investment. What do you think?”

The answer is yes, you should conduct your MML business through a separate business entity (something that has an independent, separate, and distinct existence from you, the business owner). Why? If you don’t, your personal assets like your home, investments, and personal property are totally exposed in the event of a lawsuit involving your MML business or to cover its debts.

Think there is no chance you will ever get sued? Guess again. If you are recruiting new distributors, you are responsible for the claims you make about how much money they can earn. If your promises fall through, you could be held liable, even if you are simply repeating claims you read in a company brochure or heard from your upstream distributor.

Forming a business entity is relatively simple and inexpensive in Texas. Consult with a business attorney on which entity is right for your business.

Also, regardless of how much money you are making from your MML business, treat it like a business. Open a separate bank account and credit card, and don’t pay your personal bills out of your business bank account or vise versa.

Disclaimer: This website is made available for educational purposes only as well as to give general information and a general understanding of the law, not to provide specific legal advice. By using this website you understand that there is no attorney client relationship between you and the publisher. The website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

 

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