Picture this: One sales call from you triggers sales presentations to 10,000 customers. Can it happen? Yes. How? Network marketers should not overlook a golden opportunity to promote sales through nonprofit or charitable organizations. The distributor makes money and so does the organization. The network marketing industry has become attracted to nonprofit organizations (NPO), their members and friends as a vast potential source of distributors. Handled correctly, the benefits of a networker's involvement with an NPO are mutual and substantial. The tax-exempt organization receives a source of funds that are necessary to carry out its functions and to support the causes that are deemed worthy enough for tax-exempt status. The network marketing company gains access to a potentially large and motivated customer base.
 

In recent years, nonprofit organizations have played a growing role in network marketing sales. Overnight, the membership of a charitable organization may become an instant sales organization of hundreds of thousands. The charitable organization raises these funds for worthy causes and a network marketing company finds a new market for its products, all in all, a very sound match. We have all seen pancake breakfasts, spaghetti dinners, dances and car washes for fundraising purposes. Such activities are generally sporadic or one-time events, which for the most part, have no legal ramifications. A charitable organization, which signs on as a network marketing distributor and sells products through its membership, is conducting a business activity, however, which may trigger some important legal questions affecting the group's tax-exempt status. Use of charitable organizations for network marketing distribution typically works as follows. The charitable organization signs on as a network marketing distributor. The charitable organization in turn sponsors its membership as independent distributors. The charitable organization sells products and derives profit. The charitable organization also receives override commissions on sales of products by its downline, its membership being the first level of its downline.
 

Caveat for Tax-Exempt Organizations
Use of tax-exempt organizations for network marketing activities can clearly be a bonanza for all of the parties involved. The most important advice that can be given, however, is that the company, the distributors, and the tax-exempt organizations should be fully briefed by professional tax, accounting and legal advisors on the network marketing legal requirements as well as the tax ramifications of marketing through the network marketing format.
 

Jeffrey A. Babener Babener & Associates 121 SW Morrison, Suite 1020 Portland, OR 97204

Jeffrey A. Babener, the principal attorney in the Portland, Oregon law firm of Babener & Associates, represents many of the leading direct selling companies in the United States and abroad. www.mlmlegal.com