Paying a buisiness partner..
UPDATED: Oct 1, 2022
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Paying a buisiness partner..
I am located in Ohio and was thinking about getting a partner to help me get clients. The partner would get me a client, I would do the work. In return the partner would earn X of the first sales.
Can I just transfer him that money? Or would I need to classify him as an employee/contractor? Would wiring him his earned amount be illegal?
Thanks in advance
Asked on May 29, 2018 under Business Law, Ohio
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 4 years ago | Contributor
There are certain professions (law and medicine for example) where there rules restricting how you can partner with others, who can you partner with, and whether you can pay for "leads" or client referrals. If you are not in an industry with such rules, you can do any of the following: 1) employ him as an employee and pay him as one (e.g. low base wage with a commission or bonus for clients); 2) make him a partner in your business with the arrangement that his compensation is solely in the form of a payment for clients or a share of the proceeds from clients he brings in; or 3) have him as an outside/independent contractor who is paid an agreed-upon amount (either a set fee or commission/percentage) on work he brings in. Any of these would be legal; for what you suggest, 3) would be best, since it pays him for the one thing he's supposed to do while otherwise minimizing his connection to your business; it would be the easiest structure to change, modify, or discontinue. Just put the terms of the agreement in writing (e.g. what he has to do to get paid, how much he is paid, when he is paid, etc.) and be sure to include a clause allowing you to terminate the arrangment on notice (e.g. 30-day notice).
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