Multi-Level Marketing or MLM company in India use a promotional marketing approach in which salespeople recruit new sales promoters to increase the sales of services or goods for a particular MLM organization. The goal of the company’s salesperson is to not only sell the product but also to encourage more people to buy it and spread the word about it.
As the chain expands, the first salesperson’s revenues increase over time. An MLM company registration can be started by a manufacturer or trading firm that has some special and exclusive services or products to offer and is eager to reach clients throughout the world without establishing expensive showrooms or stores.
Registration Laws for starting a MLM Company in India
The registration or creation of a Multi-Level Marketing Company is a direct selling business in India. It is not governed by a separate legislation in India. Although it was put out to the Parliament in 2005, it has not yet been made into a law. However, before establishing an MLM Company, a few things need to be taken into account. An MLM company cannot operate any of the following businesses or programs in India as they are considered to be unlawful multi-level marketing.
- The pyramid scheme, often known as a Ponzi scam, is prohibited in India. It involves an organizer creating a pyramid structure that starts with one individual representing the apex of the pyramid. The Monopolies and Restrictive Trade Practises Act, 1969 covers such activities.
- It shouldn’t be a money-transfer system prohibited under the Prize Chit and Money Circulation Schemes (Banning) Act, 1978.
Process of Starting a MLM Company in India
MLM Company registration process in India is discussed below:
1. For those starting up a Multi-Level Marketing Company Business in India, it is advised to first create a Private Limited or Limited Company since it carries less risk for the entrepreneurs. As a result, the risk associated with the firm will be restricted to their ownership stake.
2. Applying for IDSA (Indian Direct Selling Association) membership is suggested. It’s not a government agency; rather, it is established by Amway India which is a well-known MLM company in the USA. It is established with the goal of regulating all Direct Selling Companies in India and putting an end to unethical and illegal MLM business practices.
3. Applying for a GST Registration is essential for MLM company registration. A Tan Number, a Pan Number, etc. is also necessary for the firm planning to launch an MLM. Additionally, all registrations and licenses required for the product’s manufacturing and sale must be obtained from the relevant authorities. In order to develop/adopt rules, regulations, and other legal documents for the company and occasionally provide further guidance, it is also required to employ a competent legal adviser and Chartered Accountant.
4. The MLM Company registration in India is a simple process. Furthermore, the company has to own and create an exclusive website displaying all company-related material and information created by its legal counsel. Additionally, hiring an advisor or seeking the help of someone with relevant experience is encouraged. The website is incredibly significant since it is essential to this firm. If it is a new area of the company, then employing other specialists to assist in company affairs is also advised.
For people who are new to industry, it is also beneficial to attend MLM starter forums to build connections with others and get leads to useful resources. Regularly scheduling seminars and social events will assist in growing the MLM industry.
Documents Required by a MLM Company
In order to register MLM company and for its proper functioning, the company is required to maintain the following documents:
- Copy of the GST Returns along with a certificate of GST registration must be submitted to the authorities.
- MLM companies are required to maintain the Certificate given by the Registrar of Companies, Management and Operations Memorandum (MOM), Articles of Association, and Memorandum of Association (MOA).
- Copies of the company’s IT returns shall be timely submitted to the appropriate authorities.
- Company shall properly maintain the Copies of the taxpayer identification number (TIN), permanent account number (PAN), director identification number (DIN), and TAN.
- A copy of the most recent profit and loss statement, balance sheet, and auditors’ reports shall also be maintained.
- Direct sellers’ Tax Deducted at Source (TDS) Statements and the corresponding challans paid are also required to be maintained.
- The corporate website should have records of the Know Your Direct Sellers (KYDS) and Know Your Customer (KYC) formats.
In the near future, multi-level marketing companies will take the lead when it comes to starting businesses, and over the next 10 to 15 years, this number will increase to a higher number.
To stand out in the market, pre-launch deals, monthly offers, and permanent offers are also beneficial. The Unit-Level Plan and the Generation Plan are the two most often used MLM schemes. You can also consider the option of registering a MLM company if it suits your business plans and ideas.