MLM Company Incorporation

What is Multi-Level Marketing Company (MLM Company)?

Multi-level marketing (MLM) is a sales strategy where individuals promote and sell products or services for a specific MLM business. They also recruit new salespeople under their downline to expand the sales of the products and services. The sales promoters are organized in a hierarchical structure resembling a pyramid, with the initial salesperson at the top. The primary objective of the salesperson is not just to sell the product but also to entice more people to join the chain of selling the product, which in turn increases the profits of the initial salesperson. MLM is also known as network marketing, matrix marketing, or pyramid marketing.

Guidelines of MLM Company


Direct selling or marketing is a method of trading products and services outside of a traditional retail setting. Because there is no physical store involved, concerns may arise about the quality and legitimacy of the products being sold. To regulate such businesses, specific rules and regulations have been established in accordance with the relevant governing authority. Since this is a state-specific matter, the regulations may differ from one state to another.

Conditions for establishing Direct Selling Entities:

  • Direct Selling Entities are subject to distinct rules and regulations that differ from those applicable to private companies, even though they have the same scope of application.
  • Direct Selling Entities are required to hold at least one bank account with a nationalized bank.
  • Participation Deed or Memorandum of Association must be executed between the participating entities, explicitly stating the business nature.
  • The Entity must agree to pay the incentives at the rate and within the timeframe agreed upon.
  • The names and identification numbers of authorized direct sellers should be displayed on the company’s website.
  • The Entity must have a dedicated cell for resolving consumer issues within 7 working days.
  • The company’s website must provide a platform for consumers to register their complaints.

Advantages of MLM Company

  1. Affordable marketing: Network marketing is a budget-friendly approach for promoting manufacturer’s products as it does not require any expensive advertising. The quality of the standardized products speaks for itself, and word-of-mouth from satisfied customers plays a significant role.
  2. Learn by doing: There is no single school or course that teaches all the business strategies. The practical knowledge and experience of the market depend on the current environment and economy. Network marketing or MLM provides an excellent opportunity to gain hands-on experience and practical knowledge about the market at a low start-up cost.
  3. Flexibility: Network marketing is ideal for those who want a change from the typical 9-5 job, wish to earn more, or use their free time to gain financial independence. The joiners have flexibility in choosing their working hours, place, and sources.
  4. Boosts self-confidence: MLM industry encourages people to develop communication, management, and leadership skills, which builds self-confidence. Financial independence is a significant factor in enhancing self-esteem.
  5. Tax benefits: MLM business is done by small entrepreneurs who set up and produce products in small quantities at home. When a large group of distributors forms a network marketing company, most of the margin is distributed among the downline. This structure provides tax advantages and benefits for the distributor.
  6. Potential income: In the MLM industry, income depends on the individual’s efforts and work effectiveness. It is a new income stream for beginners and job seekers. Recruit more members as your downline, and you will earn extra commissions on their sales.
  7. Entrepreneurship: Network marketing offers a vast selection of products to sell from various brands. It’s up to the individual to choose which product they want to sell, the target audience, how to deal with potential leads, and manage the downline.
  8. Modernization: Traditional selling of network marketing products is time-consuming and has limited market coverage. However, with the internet and social media, the target audience is vast, and it provides an opportunity to engage with potential customers and answer their queries. Social media is becoming a significant market for network marketing and is increasing the chances of sales.

ERA Legal Services MLM Company Package

The Services which are included in our package are as Follows:
✅ Digital Signatures
✅ DIN of Directors
✅Filing of Spice form
✅Issue of Incorporation Certificate along with PAN and TAN
✅Memorandum of Association
✅Articles of Association
✅Provisional PF ESI Registration
✅GST Registration
✅MSME Registration

Steps to Start a New MLM Company

1. Incorporate a New private Limited Company: New Direct Selling Company in India should start its business preferably in the format of Private Limited or Public Limited Company
2.Go through Guidelines: New Direct Selling Company in India should starts its business preferably in the format of Private Limited or Public Limited Company.
3. Take all the needed registrations: Guidelines by MCA states that One should start a New Direct Selling Company after taking some necessary registrations.
4. Build a Plan and Software: MLM business mainly depends on the Plan, Product and Software. This is the time you work on all these three points.
5.File Undertaking to MCA: Direct Selling Entity have to file an undertaking to the Ministry of Consumer Affairs within 90 days of start of business.
6.Work for the Business Growth: You are all set, Just focus on the business and start developing your network.

Documents Required for Private Company Incorporation

  1. All directors and subscribers must provide their PAN card.
  2. All directors and subscribers must provide an identity proof such as a voter ID card, driving license, Aadhar card, or passport.
  3. All directors and subscribers must provide an address proof such as a bank statement, mobile bill, or telephone bill.
  4. Passport size photographs are required for all directors and subscribers.
  5. A current electric or utility bill is necessary to serve as proof of the registered office.
  6. A rent agreement may be required if applicable.

FAQ on MLM Company Incorporation

Q1. Can one work for one or more MLM company over a single period of time?
The majority of MLM companies do not permit their distributors to work for more than one company simultaneously. This is not only a violation of company policies, but it also raises concerns about the selling strategies of competing companies. Although many companies follow similar marketing and compensation plans, the tactics they use can differ significantly. To accommodate these differences, most MLM companies have their own set of rules and offer flexibility to customize the plan. Therefore, distributors are typically only allowed to work for one distribution company to avoid any potential conflicts. Independent distributors may choose to distribute products from multiple MLM companies at their own risk.

Q2. How to make money through MLM business?
When you make a personal sale, you can earn a good amount of money. Additionally, you can earn a commission on sales made by your downline or team members. The percentage of commission you receive is determined by the compensation plan established by the organization. Typically, the commission rate is a percentage of the sale.


Q3 How to recruit new members in the MLM business?
In MLM business, you can recruit new members either from family or friends by explaining about the product and the business. You can explain the benefits of the business by using the company manual, short videos etc.

Q4 What type of products are used for this business?
MLM business mainly concentrates on the products which are consumable. Consumable products involve healthcare, beauty products, nutritional products etc. These types of products will be used by the customers or distributors so they come up with new order for the product.

Q5 How to promote the MLM products in network marketing?
As an MLM distributor, to promote the MLM products, you can keep in contact with your downlines, family, friends, etc. Keep regular meeting with your downlines to promote the MLM products, send e-mails to the customers in contact, create a social media group to promote the MLM produce, conduct a party or seminar to show your product demo and MLM presentation.

Q6 How to make money through MLM business?
You can earn a good amount when any personal sale happens and you also earn a commission when any sale happens through your downline or team members. The commission rate depends upon the plan followed by the organization. It is always some percentage of the sale happened.

Q7 How to recruit new members in the MLM business?
In MLM business, you can recruit new members either from family or friends by explaining about the product and the business. You can explain the benefits of the business by using the company manual, short videos etc.

Q8 What type of products are used for this business?
MLM business mainly concentrates on the products which are consumable. Consumable products involve healthcare, beauty products, nutritional products etc. These types of products will be used by the customers or distributors so they come up with new order for the product.

Q9 How to promote the MLM products in network marketing?
As an MLM distributor, to promote the MLM products, you can keep in contact with your downlines, family, friends, etc. Keep regular meeting with your downlines to promote the MLM products, send e-mails to the customers in contact, create a social media group to promote the MLM produce, conduct a party or seminar to show your product demo and MLM presentation.