This question is related
to a recent question on whether a license is required to operate an
MLM. Being an independent distributor for an MLM (or Multi-Level
Marketing) company is a form of self-employment rather than employment
by a larger company. This makes an MLM distributorship an independent
small business, typically run by one person. Like any business,
it may open the owner/proprietor to potential liabilities, which you
should discuss with an attorney.
Small businesses can be structured
in one of several ways, including a sole proprietorship, a corporation,
or a limited liability company, also known as LLC. The specific
business structure you choose will determine how your company pays taxes
and the extent to which it shields you (the owner) from personal liability.
According to the Internal Revenue Service,
an LLC can be a good compromise between a corporation and a partnership
structure, with some of the benefits of both. Like a corporation,
an LLC limits the owner’s liability for the debts and actions of the
company; and, like a partnership, it allows for pass-through taxation,
which can lower your overall tax burden. Regulations and requirements
for forming an LLC vary by state.
Please note that we cannot
give legal advice in this column. We recommend consulting both
an attorney and an accountant to help you select the right business
structure for your needs. The Legal Club of America
provides legal advice and services
on a subscription basis, and accountants at H&R Block can
answer tax questions.
