Basic overview
Registration Process
Documents
Guidelines
LAW
Prohibition

MLM company registration

An MLM (multi-level marketing) business is a marketing technique that involves a salesperson selling products or services to the particular MLM business and recruiting new sales representatives to sell more products or services. The company's salesperson aims to market the product and bring in more people to sell it. The income of the first salesperson will continue to increase as the chain develops. It's also referred to as matrix marketing, multi-level marketing," and more. A company that manufactures or trades businesses with exclusive products or services and wants to connect with global customers without establishing costly stores or showrooms can establish an MLM business.

Documents Required for Registering an MLM Company

An MLM company must keep the following documents at its headquarters:

  • Authentication was given by the Enlistment Center of Organizations, MOA, Articles of Affiliation, the Board, and Tasks Reminder (Mother).
  • Directors Identification Number (DIN) for directors and taxpayer identification number (TIN), Permanent Account Number (PAN), and the TAN
  • The certificate of GST registration as well as duplicates of GST returns that have been filed with the authority
  • The copies of the IT company's returns that were filed under the authority
  • Tax Deducted At Source (TDS) statements of direct salespeople and the challans for each payment
  • Copy of the most up-to-date profit and loss accounts Balance sheet, reports, and profit and loss account by the auditors.
  • The records of those in the formats Know Your Direct Selling (KYDS) and Know Your Customer (KYC) are available on the company's website.

Government Guidelines for MLM Companies in India

The government has released guidelines for regulating the sale of services and products outside of retail stores, also called "direct selling (multi-level marketing), " safeguarding those who buy products or services through direct sellers.

  • The MLM businesses must meet the following requirements for legal direct selling as per the government's guidelines:
  • It must be a tax-exempt direct-selling entity with an income tax TDS (tax deduction at source), a goods and service tax (GST) number, and other licenses required per the laws or regulations of the central location of the business.
  • You should have a bank account at a bank that is nationalized.
  • The company's Memorandum of Association (MOA) must clearly define the nature of the business.
  • The sales incentive will be paid at your chosen rate within the agreed-upon period.
  • It is recommended that they display identification numbers and the names of their authorized direct sellers on their official websites.
  • There must be an office for consumer grievances that can guarantee the satisfaction of consumer grievances within 7 days of submitting complaints.
  • The website should offer consumers the possibility of submitting complaints hassle-free.

MLM company registration laws in India

There isn't a separate law in India that governs the registration or establishment of multi-level marketing companies. The idea was put forward to Parliament in 2005, but it has yet to be made an act of law. Certain acts must be considered before establishing the foundation of the MLM company. The following schemes and businesses are considered illegal multi-level marketing in India and are not allowed to be implemented through an MLM firm in India:

  • An arrangement in which an organizer constructs an elaborate pyramid that begins with one person at the top The scheme referred to by the name pyramid scheme is prohibited in India. It is part of an act known as the Monopolies and Restrictive Trade Practices Act of 1969.
  • It shouldn't be a money-circulating scheme that violates the Prize Chit and Money Circulation Schemes (Banning) Act of 1978.

The guidelines of the government prohibit the following actions by an MLM firm:

  • Incentive payments can be made under any name unrelated to the sales volume.
  • Supply or distribution of goods in the knowledge that these products or goods have a longer validity or are not as described by the manufacturer's specifications.
  • Direct selling or direct selling businesses should not engage in schemes to circulate money or engage in any activity prohibited under the Prize Chits and Money Circulation Scheme (Banning) Act, I978.

Registration of an MLM Company in India

The MLM Company should be a different lawful element enlisted with the LLP Act, 2008, as an LLP under the Restricted Obligation Association Act, 2008, or a company according to the Companies Act, 2013. The goals of the MOA of the MLM company must specify the business model, which includes direct selling and using multi-level, direct, or single-level market compensation programs. An MLM business must follow all legal requirements and regulations of the central and state governments, such as taxes, the Shops and Establishments Act, and trade licenses. Legal Metrology Act, custom duty laws, the Consumer Protection Act, and specific laws applicable to the industry An MLM company must be eligible for IDSA (Indian Direct Selling Association) membership. IDSA is an association of direct-selling companies in India. IDSA isn't a governmental body but a private organization in the name of Amway India. The IDSA attempts to regulate all issues affecting direct selling businesses in India and to stop unlawful and illegal MLM firms and multi-level network business practices in marketing that undermine the MLM business avenue.

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