This describes an illegal business structure that involves multiple levels of sales people, each of whom sends a commission to those above them in the structure.
For example, Steve starts a pyramid scheme business. He recruits Bill and Delores as salespeople under him. Bill and Delores in turn recruit three salespeople each to be under them. Those new salespeople recruit additional members under them, and so on.
While many legal and legitimate businesses use a pyramid-shaped structure, an illegal pyramid is different in two key ways:
- Revenue for the company is generated through the recruitment of new members, rather than the sale of products.
- If there is a product sold, it is purchased mainly by people who enter the business. Generally, products sold in a pyramid scheme are neither reasonably priced nor sold to the general public.
An illegal pyramid is a violation of both Missouri and federal law.