What is MLM?
Multi-level marketing (MLM), also known as direct selling marketing, is a business model where companies sell products or services to consumers, often through direct sales and word-of-mouth, and also recruit others to join their sales network.
Distributors/Stockists/Agents earn commissions on their own sales and on the sales generated by the people they recruit which could referred as downline.
Is it legal to have direct selling company?
Yes, it is legal in Malaysia to use direct selling business model. There are few hundreds companies registered as direct selling companies in malaysia.
As an owner of the business, you have to apply AJL license from Ministry of Domestic Trade and Costs of Living (Kementerian Perdagangan Dalam Negeri dan Kos Sara Hidup).
As a consumer, you can check the status of direct selling companies in their website KPDN.
It is very important for consumers to check before joinning any direct selling company to ensure it is legimate mlm companies since there a lots illegal mlm companies.
How to apply mlm/direct sales license in Malaysia?
To apply mlm/ direct sales license, company has to submit application thru KPDN Malaysia. The documents that need to prepared are Borang AJL1, SSM,
Company's Profile and Direct Selling's rules and policies, Decription of Products, Certificates from KKM if you are selling food/health products, NOT from NPRA if you are selling cosmetic products,
Copies of invoice from supplier to show costing and pricing, Buy back policy, MLM Marketing Plan.
What's the minimum paid up capital to apply mlm AJL license?
Applicants must consist of companies incorporated under the Companies Act 1965. The minimum company's paid up capital is RM1,500,000 for Non Bumiputra, RM500,000 for Bumiputra and RM5,000,000 for Foreigner Ownership
How long would it take for the processing of application?
Normally it took about 2 to 6 months. Applicant can apply themselve or use third party agent to apply it with addtional consultant fee
How many types of marketing plans under direct selling businesses in Malaysia?
According to KPDN of Malaysia, There are three types of marketing plans under direct selling businesses:
- Companies will recruit individuals as members/distributors to distribute the company's goods.
- The relevant members/distributors will appoint other individuals (downline) to form their network for selling the company's goods. The recruitment process can continue to a reasonable level.
- Each member/distributor will earn commissions/bonuses/incentives from personal sales and sales made by members/distributors within their network (over-riding bonuses).
- Companies will appoint sales representatives/sales agents and pay salaries/commissions/a combination of salaries and commissions based on the total sales made.
- Sales representatives/sales agents are not allowed to recruit/sponsor other sales representatives/sales agents.
- Sales of goods or services conducted by an individual, either personally or through any authorized person, via mail or any other delivery method, including electronically.