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).

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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