Plain-English explainer
Income disclosure vs compensation plan: what is the difference?
Short answer: An income disclosure shows what participants received or earned during a period. A compensation plan explains the rules for how participants may qualify for pay.
Why both documents matter
A compensation plan can show possible payments, ranks, bonuses, and qualification rules. It does not tell you what most participants actually keep after expenses.
An income disclosure can show participant outcomes, but it may still leave out expenses, inactive participants, short-tenure participants, or other details.
Read them together
The compensation plan tells you what activities may create pay. The income disclosure helps you test whether those rules usually lead to meaningful income for ordinary participants.
If the plan is complicated, slow down. Ask the person recruiting you to point to the exact rule that applies to the claim they made.
Questions to ask in writing
- Can you send both the income disclosure and compensation plan?
- Which compensation-plan rule supports the income claim I was shown?
- What did typical new participants keep after expenses under this plan?
Related pages
- What should an MLM income disclosure show?
- What is an MLM compensation plan?
- Income disclosure library
Sources
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Regulator guidance
Multi-level Marketing Businesses and Pyramid Schemes
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Regulator guidance
Business Guidance Concerning Multi-Level Marketing