Expanding your Multilevel Marketing company geographicallyCory Lewis, C.A.E., B.A., LL.B., LL.M., Barrister & Solicitor Expanding your Multilevel Marketing company geographically, whether internationally or within a country often increases the number of considerations relevant to successful business planning. This article identifies some of the relevant considerations. Network marketing implies growth through interpersonal relationships which often exist independent of geographic and political boundaries. Consequently a network marketing company’s growth naturally takes it across geographic regions and political borders. This type of growth leads to a number of complexities for company operator due to the application of one or more regimes to the enterprise and due to the differences between the respective regimes applicable to the enterprise. This complexity requires company operators to secure adequate counsel to ensure that the complexities are dealt with in the manner most conducive to sales and net profit. Knowledge of a jurisdiction should be obtained during the early part of planning to carry on business within a jurisdiction. This prescription provides a particular challenge to network marketing companies due to the nature of their untimed geographic growth through interpersonal relationships rather than through orderly expansion based upon physical proximity. Differences of Political Structure Some political systems have a single government for an entire country while others have many governments throughout a country. Some political systems have elected governments while others do not. Differences of Government Roles The role of the government in international trade varies between governments. Some political systems may involve a role by government which seems intrusive to those from a jurisdiction with a less interventionist government. Where elected governments are actively involved, their interests in a transaction may involve social policy or success in upcoming elections rather than only the commercial interests involved in the transaction. Differences of Political Stability and Political Opinion Some jurisdictions are susceptible to instability. Other jurisdictions, while having known and orderly procedures for changes of government, have competing political parties with very different opinions about how best to pursue the nations’ interests. In either situation, a change may result in a relatively favorable, or relatively unfavorable, climate for conduct of a particular business. For example, differences of opinion may exist with respect to individual and group rights, privacy, and the appropriateness of particular commercial activities. Differences of Legal Systems Number of regimes In federal systems there may be a federal government as well as a number of state or provincial governments. Each of these governments may be divided into a number of departments. Several of these governments and departments may have jurisdiction relevant to a particular transaction. In other systems, a single government may have jurisdiction, although that may be divided between departments. Taxation Operating across jurisdictional boundaries may subject a single enterprise to more than one taxation regime, each of which has a number of separate taxes. For example an enterprise from the United States of America carrying on business in both the U. S. A. and Canada would, subject to the possible application of alleviating provisions of the U.S. Canada Tax Convention, be subject to taxation in both countries. Further, there are more than one form of tax in each country. For example, in Canada there are Federal, Provincial, and Territorial Income Tax, Corporate Capital Tax, Goods and Services Tax, Provincial Sales Tax, and Harmonized Sales Tax to name only some of the possibly applicable taxes which exist only in Canada or at rates different than those applicable in the U. S. A. Customs The flow of products across borders is often regulated. Countries often use border crossings for the collection of tax and for inspection of products for compliance with local laws. Rights Rights adequately protected at home may be unprotected outside of your jurisdiction. For example trademarks and patents held in one country may be unprotected, or may already be held by other parties, in other countries. Compliance Compliance with legislation in one jurisdiction is often unrelated to compliance with differing legislation governing the same activity in another jurisdiction. For example, in Canada the definitions of direct selling, and the policies determining the application of the definitions, vary between the respective Canadian jurisdictions. Consequently a single procedure or product purchase agreement form may be legal or create certain rights or duties in one jurisdiction and may be illegal or create different rights or duties in the neighboring jurisdiction. This could lead to the comical, but legally possible, consequence of a person straddling a border with one foot in each jurisdiction being in compliance in the jurisdiction in which her left foot rests and being in violation in the jurisdiction in which her right foot rests. In an international situation common to network marketing, certain substances sold as nutritional products may be legally sold in the one country while being illegal in another due to one of its many elements being treated differently in each country. Rights determination Because portions of a course of conduct may occur in different jurisdictions, it may be subject to adjudication in more than one jurisdiction. Consequently it is common to provide for a forum of convenience for a transaction and for adjudication in a specified jurisdiction or by a specified set of rules. Monetary Considerations Changes in the relative values of the world’s currencies result in largely unpredictable losses or gains. For example, if a company purchases a product in U.S. dollars and sells it for British Sterling, then the company’s profit is affected by the frequent changes in the exchange rate between U.S. dollars and British Sterling. Sales may also be affected by exchange rate flucutations. For example, if a product is sold for U.S. dollars outside of the U.S., and if the value of the local currency decreases relative to the U.S. dollar, then the product will be relatively more expensive for the consumers outside the U.S. Further, exchange controls exist in some countries as an attempt to control the cross border flow of currencies. Cultural Differences Cultural differences can exist between regions, and between peoples within a region. These differences may be relevant to the success of network marketing as a method of distributing product. These can relate to the opinions of what is appropriate between parties with a personal non-commercial relationship, the very predisposition to, or not to, engage in direct selling, or the willingness to use otherwise available family or leisure time for commercial enterprise. Linguistic Differences Linguistic differences may exist between countries or between regions within a country. Expanding to a region in which a significant portion of the population prefers a different language, may necessitate the expense of preparation of materials, contracts, and packaging in one or more languages as well as the employment of customer service personnel fluent, or at least competent, in all necessary languages. In some instances governments of jurisdictions having populations employing more than one language create legislative requirements for the use of more than one language. ---------------------- For a legal opinion regarding whether your multi-level marketing plan complies with the Canadian requirements, or for legal assitance establishing your multi-level marketing company in Canada please feel welcome to contact us. Winnipeg is located at Canada's geogaphic centre and offers complete telecommunications, call centre, banking, wharehousing, shipping, air, road, and rail service to the rest of North America. Cory Lewis, C.A.E., B.A., LL.B., LL.M., Barrister and Solicitor, practices law with preferred areas of practice in multilevel marketing and direct selling law. He can be reached in Winnipeg, Manitoba, Canada. Telephone: (204)
792-9982 |
 Back |