How the money actually works
Compensation plans, points, taxes and the law, explained in plain language with diagrams. Read this before believing any income slide.
How do direct selling compensation plans work?
Direct selling compensation plans pay sellers in two ways: a retail margin on products they sell, and commissions or bonuses based on sales volume, measured in points, across the team they sponsored. Plan types such as binary, unilevel and matrix differ in how a team is structured and which sales count.
Ten guides in this section
All ten guides are published. Each one is reviewed before it goes live and updated when the rules change.
How direct selling compensation plans work
Margins, commissions and bonuses explained.
Read the guide →GUIDE02Binary vs unilevel vs matrix
The plan types compared in one table.
Read the guide →GUIDE03What are PV and BV?
Points, volume and why they aren't rupees.
Read the guide →GUIDE04How direct sellers actually earn
Retail margin vs team commission.
Read the guide →GUIDE05Direct selling tax in India: TDS and GST
Section 194H, returns and registration.
Read the guide →GUIDE06Direct selling taxes in the USA
1099-NEC, Schedule C and self-employment tax.
Read the guide →GUIDE07Direct selling laws by country
A one-table overview.
Read the guide →GUIDE08India's 2021 Direct Selling Rules, explained
Clause by clause, in plain English.
Read the guide →GUIDE09FTC guidance on MLM, explained
What the US regulator looks for.
Read the guide →GUIDE10Direct selling licences in Malaysia
The 1993 Act and what it requires.
Read the guide →Two common plan shapes
The shape of a plan changes what you're pushed to do. Binary plans reward balancing two legs; unilevel plans reward depth and width.
Binary vs unilevel: the shape of the team
A binary plan limits you to two "legs"; a unilevel plan lets you sponsor any number of people directly.
What is the difference between retail profit and commission?
Retail profit is the margin you keep when a customer pays more than your distributor price. Commission is paid by the company on points from your own and your team's sales. Healthy businesses earn from both.
Which compensation plan is best?
No plan type is best in general. What matters is whether pay comes mainly from real customer sales, what it costs to stay active each month, and what the income disclosure shows.
Do I have to pay tax on direct selling income?
Yes, in almost every country. Commission is income. In India TDS is usually deducted under Section 194H; in the USA you report it on Schedule C.