Multi-Level Marketing and Sponsored Door-to-Door Sales Business Registration

Procedure

Procedure

1. 01

   Classify the business type and check disqualification: Determine from the structure of the sales organization whether it is multi-level marketing, which pays sponsorship allowances based on recruiting lower-tier sellers and their performance, or sponsored door-to-door sales, which pays no sponsorship allowance for the performance of sellers other than the seller's immediately lower-tier sellers. Check that the representative, officers and controlling shareholders do not fall under the grounds for disqualification in Article 14 of the Act, such as being a minor, a person under limited or full adult guardianship, a bankrupt who has not been reinstated, a person for whom 5 years have not passed since completing a prison sentence for violating the Act, or a person for whom 5 years have not passed since registration was revoked.

2. 02

   Check the capital requirement: A multi-level marketing business must have capital of at least 500 million won, and because impaired capital is deducted and legal reserves are added in the calculation, compliance is checked against the latest settlement of accounts. A sponsored door-to-door sales business does not submit proof of capital.

3. 03

   Conclude a consumer damage compensation insurance contract, etc.: Before registration, conclude one of an insurance contract for consumer damage compensation, a debt payment guarantee contract, or a mutual aid contract with a mutual aid cooperative, and obtain the supporting certificate. If a sponsored door-to-door sales business has sold at least 70/100 of the goods, etc. supplied to its sellers to consumers who are not sellers, a confirmation of the final consumer sales ratio and proof of sales for the previous business year may replace this contract, but this does not apply to sales made through electronic transactions.

4. 04

   Prepare the sponsorship allowance standards and sales method documents: Set objective and clear standards, calculated on a one-year basis, so that total sponsorship allowances do not exceed 35/100 (38/100 for sponsored door-to-door sales) of the total price (including VAT) of goods, etc. supplied to sellers. Check that there is no standard paying different allowances on condition of recruiting a certain number of lower-tier sellers and that the burden imposed on sellers is no more than 50,000 won per year, and set out inventory management and allowance payment methods in the sales method document.

5. 05

   Submit the application and receive the registration certificate: Attach the proof of capital, the insurance or mutual aid contract certificate, the sponsorship allowance standards, the sales method document and the document stating business days to the registration application in Annexed Form No. 7, and submit it to the Si/Do having jurisdiction over the principal office. The official checks the corporate registration certificate and the business registration certificate through shared administrative information, and once the registration requirements are met, a multi-level marketing business registration certificate (Annexed Form No. 8) or a sponsored door-to-door sales business registration certificate (Annexed Form No. 9) is issued.

6. 06

   Report changes, suspension and closure: If application details such as trade name, address or representative, the capital, the consumer damage compensation insurance contract, etc., or the sponsorship allowance standards change, file a change report within 15 days from the date the change occurred (for capital, the date the settlement of accounts is finalized). For changes due to termination or expiry of an insurance or mutual aid contract, supporting documents must be submitted 3 months before the termination or expiry date, and suspension, closure and resumption of business must be reported in advance.

Filing route

Filing route

Deadlines & processing notes

Deadlines & processing notes

Basic documents

Basic documents

Because impaired capital is deducted when calculating capital, a company may fail the requirement and be refused registration even if its registered capital is 500 million won, so compliance with the capital requirement should be checked against the latest settlement of accounts before applying.