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To confirm Diva's post, you are talking about recruiting "Direct Sellers," and a person can be a Direct Seller under his or her own name and SSN -- and that's what the 1099 would reflect. If their state or local jurisdiction requires a license to sell your product (as with insurance products or real estate in most states), then they'll need a license (and you'd want to confirm and verify that as part of the qualification process).

The "horror stories" you mentioned often arise because many employers mistaken think that there are only two categories of workers -- "Employees" and "Independent Contractors." There are actually five choices, and "Statutory Nonemployee" is the one you want. See IRS Publication 15-A under Statutory Nonemployee - Direct Seller at http://www.irs.gov/publications/p15a/ar02.html#d0e510 and I think you'll agree that it best fits your situation.

If someone is an independent contractor, the employer only has the right to control the result of the work being done, not the means and methods of accomplishing that result. If someone is selling YOUR product, however, you ARE going to control the means and methods to some degree -- or else you're going to have some misled and angry customers! So by calling them contractors, but not treating them as such, employers wade right into the trap of having them reclassified as employees. You can avoid that by just calling them the right thing from the beginning -- so it was an excellent question to ask when you did!

Best wishes.