FINDER’S FEE AGREEMENT
Finder’s Fee Agreement Definition
A Finder’s Fee Agreement is an agreement in which a finder, intermediary or facilitator of a transaction, is hired for a retention period and is paid a commission, or a “finder’s fee”. Finder’s fee agreement pdf.
The intermediary’s commission will act as a reward once the intermediary presents a lead or a new client to the party of interest, that later materializes into a financial incentive, such as an investment.
Finder’s Fee Agreement Key Terms
The type of compensation will that will be governed under a finder’s fee agreement will depend on a number of issues: 1) the importance and value of the finder’s contacts; 2) how unique the finder’s services proved to be; 3) and how easy it was to close the transaction.
The compensation structures to choose from are the following:
Percentage of gross proceeds pain in cash – This is by far the most common compensation structure that will be found in a finder’s fee agreement sample. The structure is as follows: the finder will earn a percentage of gross proceeds the company is due to receive from the transaction arranged by the finder.
Set fee over a period of time that is paid in cash – Under this structure the company will pay the finder’s fee over a prescribed period of time. This structure will be more applicable to a finder providing advisory services to the company that has the exact same value as whether a deal is achieved or not.
Equity compensation – Under an equity compensation structure, the finder’s fee will be in the form of equity compensation instead of cash, based on either the amount of gross proceeds or the time of service provided. Equity compensation may come in the form of either: 1) actual ownership or interest in the company; or 2) “phantom interest”, which is a form of ownership where the company may award the finder with the benefits of ownership, but only under certain circumstance, and without any right to vote.
The parties will have to clarify in the finder’s fee if the finder will be entitled to any reimbursement for any out of pocket expense incurred on the job, and if so, whether a pre-approval of expenses is required by the employer.
IDENTIFICATION OF PROSPECTS
The parties will have to clarify an agreed upon method to identify prospect under the finder’s fee agreement sample, or allow for a more flexible approach where the finder could have the right to identify prospects whenever available.
The parties will have to decide how long the payment terms to the finder will last after termination of the finder’s fee agreement, in addition to the conditions upon the finder may be terminated prior to the end date of the agreement.
Both parties will have to clarify proposed tax arrangement, if applicable, with qualified tax advisors and consultations. The value of doing so would be to select the structure that would most benefit the finder.
Product ID: 23922AY64
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⇒ Length: 3 pages (min.)
⇒ Last Revision: 7 May 2020
⇒ Format: MS Word (.DOCX)
⇒ Rev. Number: 14847377
⇒ Product ID: 23922AY64