Wednesday, 13 April 2011

Increase the Profits in my MLM Business

Most people in a Multi Level Marketing business ask themselves frequently how can I Increase the Profits in my MLM Business?  This article explains a very simple way that many people with a Multi Level Marketing business can instantly increase their profits. Most people that could do this are not doing so.

This is one of those articles which may make your eyes glaze over within ten seconds of seeing what this is about, but bear with me because it could save you a lot of money and is amazingly simple to do. So please commit to read to the end, unless you prefer to pay more money than you need to HM Revenue & Customs!

 I am not an accountant so I am not the expert on this subject and before doing anything I advise you to take professional advice. I want to briefly explain a concept that most people in Multi Level Marketing do not consider. Also, while I believe this will apply to most MLM businesses, this may not apply to every network and may depend on all sorts of variables.

 Firstly let us clear up one popular misconception; while there is a threshold over which we must register for VAT, anyone, even those below this threshold has the option to register for VAT. If you want to you can register for VAT the day that you start your business.

 Most conventional businesses supplying the consumer market want to avoid registering for VAT until they reach that threshold because it would mean that they would have to charge their customers VAT which they don't do if they are not VAT registered. For example a Painter & Decorator that is not VAT registered can effectively charge their customer significantly less than their competitor that is VAT registered.

 In most MLM businesses the scenario above does not apply: all distributors, whether VAT registered or not are charging their customers the same and that price normally includes VAT. The difference between the VAT registered Distributor and the non-VAT registered distributor is that the distributor that is registered for VAT can claim back the VAT that they pay on their legitimate business expenses.

 Actually how it works may vary from one Company to another but as we all come under the same laws (in the UK), the principles should still apply.

 When you are not VAT registered, you still collect the VAT from your customers and then pay that to the Company who then pay that to HMRC.

 When you are VAT registered (this is how it works with our particular business) you still collect the VAT from your customers and still pay it to the Company. Then, the Company will pay you the VAT on the products and services that you have supplied each period and you then pay that to HMRC, minus the VAT that you have paid on your business expenses.

 The attention to detail with your record keeping could put you off from registering for VAT but even that is not the challenge that you might expect when you register for flat-rate VAT. Flat rate VAT is incredibly simple to work with and the administration time for me is about thirty minutes every three months. Time well spent.

So, I hope that if you are not already VAT registered you make enquiries with your Company about how it would work with them and seek advice from an accountant on the suitability of registering yourself for VAT and for flat rate VAT specifically. For more information on our VAT registered business click here.

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