How to read an income disclosure statement: 7 checks before you believe any number

What is an income disclosure statement?

An income disclosure statement is a document in which a direct selling company reports what its participants actually earned over a year, usually by rank. To read one, check who is counted, use the median rather than the average, find the share earning nothing, and see whether figures are before costs.

It's the closest thing to an audited answer to the question every newcomer asks: what do people like me actually earn? Slides at events show the top. This document shows everyone.

The seven checks at a glance

1. Find the latest full document
2. Check who is counted
3. Use the median, not the average
4. Find the share who earned nothing
5. Separate gross from net
6. Read the rank table as a pyramid
7. Read the footnotes

1. Find the latest full document

Look in the company website's footer or legal section, or search for the company name with "income disclosure" or "earnings statement". Then check:

• The year. Use the latest. Old statements flatter a company that has since changed its plan.
• The country. Many companies publish one global or US version. Results in your market can differ a lot.
• Whether it's the full document and not a one-page infographic. A summary can omit the parts that matter.

If you can't find one, ask your sponsor for the link. If there isn't one, that's a red flag. Go to flag 10 in our checklist.

2. Check who is counted

The same company can look very different depending on the group that the percentages are based on:

3. Use the median, not the average

The average adds everyone's income and divides by the headcount, so one big earner pulls it up. The median is the middle person: half earned more, half earned less. The median is closer to what you should expect.

Here's an invented example of ten participants, with incomes in rupees per year:

A company reporting "average income ₹10,000" in this example is telling the truth. It would still be misleading to a newcomer, because nine out of ten earned ₹5,000 or less. If the document gives only an average, ask for the median.

This isn't only a theoretical worry. In 2024, FTC staff analysed 70 MLM income disclosure statements and, in the FTC's summary, found that in most of them the typical participant earned $1,000 or less a year, and that in at least 17 of the companies most participants made no money at all. Read the FTC's write-up and its consumer alert for the detail.

4. Find the share who earned nothing

Many statements include participants who earned no commission in a "no rank" or "unqualified" row, often with a footnote. Add up the participants in rows with zero or near-zero earnings. That's your chance of getting nothing.

Here's an invented rank table, to practise on:

A seller reading only the last row sees ₹12 lakh. Someone reading the whole table sees that 70 in 100 earned nothing, and that the weighted average (₹14,220) is pulled up by the top two ranks: just 3 in 100 people, yet nearly three-quarters of the total. The median participant earned ₹0. That's the number to take to your decision.

5. Separate gross from net

Most statements show commission or bonuses paid, which is revenue to you, not profit. Check whether it's before:

• Your own product purchases, including the monthly amount needed to stay active.
• Kit, training and event costs, and travel to them.
• Delivery, samples and phone data.
• Tax. In India, TDS is usually deducted from commission; in the USA you owe self-employment tax.

If costs aren't reported, ask your upline for their after-cost yearly figure and compare it with the statement. The gap is informative. See the money flags →

6. Read the rank table as a pyramid

Plot where the percentages fall. In nearly every table the bottom row holds most people and the top row holds a tiny share. That's normal in any commission-based business. What you're checking is:

• How big the first earning rank is, and what it pays after costs.
• How quickly percentages shrink as ranks go up.
• Whether the rank you're being pitched is reachable for people like you. Ask what share of new joiners reach it within two years.

A table where almost all the money sits in ranks that fewer than one participant in a hundred reaches isn't proof of a pyramid scheme, but it is a reason to read the pyramid scheme tests again.

7. Read the footnotes

The footnotes often hold the most important numbers. Look for:

• Rank at year-end vs highest rank reached. The first flatters; the second can inflate.
• "Average" per rank. It's usually the average of those who held the rank, and doesn't include people who dropped out earlier. People who quit don't appear in later rows.
• Exclusions: new joiners, customers, certain countries, "inactive" accounts.
• Words like "potential", "up to" and "can earn". The statement should report what was paid, not what's possible.
• Currency and period. Rupees or dollars, calendar year or financial year, and whether it's one market or global.

Does the pitch match the paper?

Once you've read the statement, put it next to what you've been told. Ask your sponsor each of these, and compare the answer with the document:

1. "What does the median participant earn, per the company's own statement?"
2. "What share earned nothing?"
3. "What did you earn last year, after all your costs?"
4. "How long did it take you to reach the rank you're showing me?"

When a presentation talks about earnings that the income disclosure doesn't support, believe the document. Companies are held to what they publish, and regulators look closely at income claims that can't be backed up.

Quick walk-through: 5 minutes with any statement

1. Find the group counted (everyone, or only "active"?).
2. Find the row with most people and what it paid.
3. Add the share earning zero or near zero.
4. Ask for the median if only an average is given.
5. Estimate your costs and subtract them from that first row.

If the result is a loss at the rank where most people sit, you know what the typical outcome looks like, whatever the stage presentation says. If you're still unsure, send me the statement by email and I'll give you a written, company-neutral read of it.

Frequently asked questions

What is an income disclosure statement?

An income disclosure statement is a document in which a direct selling company reports what its participants actually earned over a year, usually broken down by rank. It is the best public evidence of what a typical participant earns, as opposed to what top earners achieve.

Is a company required to publish an income disclosure statement?

It depends on the country and sometimes on the company's own commitments or past regulatory settlements. Many companies publish one voluntarily. Check the rules where you live, and treat a refusal to provide one as a red flag in itself.

What is a good median income in direct selling?

There is no standard number. Compare the median with what it costs to take part: kit, monthly minimums, travel, events. If the median participant earns little or nothing before costs, the typical result is a loss.

What should I do if the company has no income disclosure statement?

Ask for one in writing. If there isn't one, treat every income claim you hear as unverified, ask the team for their own after-cost figures for each of the last three years, and compare with a company that does publish.

Sources

• U.S. FTC: Business Guidance Concerning Multi-Level Marketing. www.ftc.gov
• U.S. FTC Consumer Advice: Multi-Level Marketing Businesses and Pyramid Schemes. consumer.ftc.gov
• Department of Consumer Affairs, India: Consumer Protection (Direct Selling) Rules, 2021. consumeraffairs.nic.in
• U.S. FTC: Report fraud. reportfraud.ftc.gov
• FTC staff report: analysis of 70 MLM income disclosure statements (2024). www.ftc.gov
• FTC consumer alert: what MLM disclosure statements are really telling you. consumer.ftc.gov