By Allison Powe

MISSISSIPPI STATE -- Get-rich-quick fantasies can be appealing, but use common sense when an opportunity comes along that sounds too good to be true.

Becoming a distributer for a multilevel marketing company may appear to be a good way to make extra income. But before investing, make sure you know the difference between a legitimate opportunity and a pyramid scheme.

Multilevel marketing companies rely on independent businessmen and women (distributors) to sell products. Although there are many legitimate multilevel marketing companies, pyramid schemes aim for quick profits by selling the right to recruit others.

Dr. Beth Duncan, extension home-based and entrepreneurial business specialist at Mississippi State University, said pyramid schemes are not concerned with the actual sales of products, but more in recruiting people to invest in the "opportunity."

Promoters behind a pyramid scheme make most of their profit by signing up new recruits. For everyone to profit in a pyramid scheme, there would have to be a never-ending supply of participants.

Since there is only a limited supply of new recruits in a given area, the distributors would soon be trying to recruit each other. The pyramid eventually collapses and investors lose their money.

"When multilevel marketing companies are product-based that is a good sign, but if a company seems to be more recruitment-based, that should be a warning of a pyramid scheme," Duncan said.

"Anyone can fall victim to pyramid schemes, but the people they have the most impact on are those who don't have the money to lose," Duncan said. "Thousands of unsuspecting investors have lost millions of dollars by investing in companies with pyramid schemes."

Duncan said people can protect themselves from these schemes before they lose any money. Before deciding to invest in a multilevel marketing company, consider the following:

- If you have to put up a significant amount of money to get involved, check on the company to see if it is legitimate.

- Most legitimate multilevel marketing companies will buy back unsold inventory for at least 80 percent of what you paid. If the company will not buy back products, you could lose money on items that will not sell.

- Remember, multilevel marketing depends on selling to consumers and establishing a market for quality products. If the company seems to be making money by recruitment alone, do not get involved.

"Always check out the company before investing," Duncan said. "Ask others about their experiences with the company and its products.

"Check with the Better Business Bureau in the area or call the state attorney general's office to investigate the company's legitimacy," Duncan said.

"If it sounds too good to be true, it probably is. An easy way to get rich quick just doesn't exist," Duncan said.

Another good precaution is getting all the facts about the company, its officers and its products. Get written copies of the company's marketing plan and any sales literature that is available.

"If you realize you have invested in a pyramid scheme, it's best to just get out of it as soon as possible. It is hard to get any money back from a scheme of this type," Duncan said.

Anyone who has fallen victim to any fraudulent business schemes should call the Attorney General in Jackson at (601) 359-3680.