Understanding the MLM Disclosure Statement

By:   Lynn M. Mckeel, Fall 2017 IAC Student Intern

Many states, including Georgia, require MLMs to provide a Disclosure Statement. According to Georgia law, the disclosure statement must:

  • Be provided at least 48 hours prior to the new recruit signing any business opportunity contract or at least 48 hours prior to the receipt of any consideration (such as product delivery) by the seller. The law even requires the font of the Disclosure Statement to be at least 10-point type font so that the any reader could reasonably review the document.
  • Include the name of the company, whether the company is doing business as a proprietorship, partnership, or corporation; all of the names the company does or has done business under;
  • Include the length of time the company has sold products and the type of products sold;
  • Include a full and detailed description of the services the recruiters and company undertake to perform for you, the new recruit;
  • Include a copy of a current financial statement from the past 13 months, updated to reflect any material changes to the company’s financial condition;
  • Include complete description of any training promised by the company;
  • Include the total number of recruits who have actually received earning in the amount or ranged specified within three years prior to the date of the disclosure statement;
  • Include the company’s principal business address and the name and address of its agent in this state authorized to receive service process.

Additionally, the Disclosure Statement must include the following promises:

  • If the company fails to deliver the product or supplies necessary to begin substantial operation within 45 days of the delivery date stated in the contract, you may notify the company in writing and demand that the contract be canceled.

“The company [promoting an MLM venture] shall collect no more than 15% of the [initial buy-in costs]. The balance shall be paid into an escrow account, established with a bank or an attorney, which is paid upon by both [the company and the recruit]. The balance in the escrow shall be paid to the company 60 days after the date the [new recruit begins operation of the business] or upon complete compliance with the terms of the contract.