You may have heard the term pyramid scheme before but do you understand what it is exactly and how they work? You will never hear this phrase without a negative tone attached to it.

This is because they are a non-sustainable business model. Mostly they are used in get rich quick programs and are promoted by people who are not very ethical in their financial dealings.

How do they work? Well, if you think about the shape of a pyramid where it has a large base at the bottom and then comes to a small point at the top, then it will give you a good picture of what this model looks like.

It starts out with one person at the top who comes up with a “great idea” to make a lot of money without having to work for it. These are the types of people who think that you can make money without putting forth any effort and working hard to earn it.

Usually it does not involve any actual products or services to buy or sell. Mainly, it is started just for the sole purpose of exchanging money with other people that you get to enroll without anything else involved.

For example, the first person finds two more people to take the stage right underneath him. He will ask that they each give him two thousand dollars and promises that they will make more than that after they each find two more people.

Those two people each find two other people to give them two thousand dollars each so they end up with four thousand dollars. Since they already gave two thousand to the person at the top, they just made an easy two thousand.

As so the cycle continues. Each person finds two more people to pay them two thousand dollars after they paid the previous person their own two thousand dollars.

Sounds like the perfect get rich without working plan? If you can convince other people to invest in this type of scheme, then it can work for you.

You can even make the initial amount more or less than two thousand dollars; it can be whatever you want. Sounds easy and like it would work out really well huh?

There are a couple of problems with this method of “working”. The first and most important point is that this business model is completely illegal and is fraud.

They are illegal in many countries around the world including; Denmark, Australia, Brazil, New Zealand, Japan, Switzerland, Taiwan, the United Kingdom, Italy, Iran, France, Germany, Mexico, and several other places. This has not stopped people from trying to get away with these types of programs though.

Some people claim that this is just multilevel marketing (which is legal) and use this as an excuse to avoid paying taxes on money that they got as a “cash gift”. Technically, you can give someone a cash gift of up to around twelve thousand dollars a year without being taxed for it.

But that is exactly what it should be. Just a gift without you expecting anything in return.

When you engage in this type of program, you can give money to other people without being taxed on it which is legal. But then you go to recruit other people below you to give you money and this is what makes it completely illegal.

Schemes like these have been around for the least century and have changed many times with many variations of the same thing. Just more people are trying to hide the true nature of the program to make it legal.

The second problem with this is for the people at the bottom of the pyramid. What happens when they cannot find anybody to put underneath them?

They lose two thousand dollars after they were promised that they were going to make that much after they paid the people above them. People who try to sell these kinds of programs to you are unethical people and should not be trusted so it is important for you to recognize signs of a pyramid scheme so that you do not get involved with any type of illegal activity.

About the author of this article:

Jack R. Landry has worked since 1988 as a tax attorney. He has written hundreds of articles about finding a Tax attorney las vegas.

Contact Info:
Jack R. Landry
JackRLandry@gmail.com

http://www.TaxCrisisInstitute.com

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