The word “Ponzi” and particularly “Ponzi” scheme gets thrown around a lot. It’s kind of like the word ‘cult.’ Who is in a cult? Seems like lately the definition is anyone who has a strongly held belief that you don’t happen to believe. But we’re not going down that road today.

What is a Ponzi scheme? Are network marketing companies, by definition, Ponzi schemes?

Let’s start off with the definition of a Ponzi scheme. It is an investment where old investors are paid off with new investor’s money. It’s truly robbing Peter to pay Paul. If the new investment money stops, and it inevitably will at some point, the scheme collapses.

Usually the Ponzi scheme is based around some kind of somewhat plausible investment strategy like real estate in an over-heated economy, hedge funds, offshore investments or even postage stamps, like the original scheme by Charles Ponzi. There might be an original plan to make money and give it to investors. Somewhere along the line the investment plan doesn’t return what is expected and rather than admit failure, the plan promoters start using other investor’s money to pay out. Or it could be that bad accounting doesn’t really tell the promoters how much profit there is and so they make a mistake based on bad business principals. Or it could be that it’s a problem right from the start.

Are network-marketing companies Ponzi schemes? Some are. If there is no product or retail plan, then definitely you have a Ponzi scheme. If the only way you make money is by signing people up or bringing in new investors, you might have a Ponzi scheme.

A network-marketing company, also known as a multi-level marketing company, direct selling company, MLM or home-based business opportunity, is simply a tiered method of creating affiliates. If there is a product and legitimate retail sales opportunity, then you definitely do not have an illegal program.

I’m personally in Numis Network, the first MLM that I have ever worked. (I use Send Out Cards and Arbonne as a customer, but don’t actively work either.)

Face it, I just finished my 31st tax season. I also have a number of websites that provide income streams. But I wanted something more. I wanted a way to leverage passive income growth. An MLM can do that. I also didn’t want a Ponzi scheme, so I had to have a product that I could behind. And who couldn’t get behind silver and gold investing, especially in this economy?

So that’s why I signed up for Numis. It was a chance to build passive income. I could buy silver and gold at preferred rates. And there was a special tax advantage that Numis has. Want to know more?

Drop me an email at Diane @ USTaxAid.com.