Full question:
I am not a broker or securities dealer. Is it lawful for me to execute a finders fee agreement with a company (seller) to introduce them to other companies for the purpose of the introduced company to invest equity in the selling company?
- Category: Contracts
- Subcategory: Finder's Fee
- Date:
- State: Minnesota
Answer:
A finder's fee is a payment made to someone who connects two parties in a transaction. This can occur in various contexts, such as recruitment or real estate. For instance, a recruitment agency may receive a fee for referring a new employee, or a real estate finder may be paid for locating property or buyers.
However, if you plan to negotiate sale terms, you may need to be a licensed broker, as doing so without a license could violate the law. State laws vary and may provide exemptions for certain individuals, allowing them to receive compensation without needing a license. For example, some states permit property management firms or apartment complex owners to pay a small finder's fee for tenant referrals without requiring licensure.
In corporate transactions, a company may pay a finder's fee to someone who identifies a potential merger or acquisition target. This fee is often performance-based and may be paid upon the closing of a sale. Generally, the seller pays the fee, but sometimes the buyer may cover it.
The legality of your finder's fee agreement depends on the specific transaction and the states involved. Certain professions, like real estate brokers, require licensing. Assisting in financing a transaction might also be considered a licensed activity. Therefore, it's advisable to consult your local professional licensing board for guidance.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.