The Finder's Fee: Paying an Unlicensed Referral Source

Start with what the statute actually prohibits. The ban is on compensation for brokerage services - procuring a buyer, marketing, negotiating, advising on price. A fee that is contingent on a closing and computed as a percentage of commission looks much more like compensation for procuring a transaction than a token thank-you for an introduction. Contingency plus percentage is the classic fingerprint of a brokerage split. A flat, modest referral gratuity for a named lead is a different animal and may survive scrutiny in some states; a 20% success fee probably will not.

Then the silence problem. Silence in a licensing statute is not permission. Regulatory counsel should give you a written opinion for your specific state, and you should keep it in the file. Absent that, the conservative reading governs, because the downside is unlicensed brokerage activity - a licensing-board matter, not just a contract dispute.

The retroactive payment fails for a separate reason regardless of the statute. Marcus does not want to appear on the settlement statement. Undisclosed compensation to a third party is exactly what your internal policy and any code of ethics you are bound by forbid. A payment nobody can see is a payment you cannot make. If the fee is legitimate, it survives daylight; if it only works in the dark, it is not legitimate.

Conclusion: decline the retroactive $37,200 as structured, decline the percentage-of-commission structure, and do not agree to concealment. Offer instead a fixed referral acknowledgment disclosed in writing to each seller and reflected in your files.

It converts a licensing question into a fiduciary and independence problem, and it is the more serious of the two.

The conflict runs in three directions. First, Marcus owed the seller a duty of loyalty as the seller's accountant. Steering that client to a broker who then pays him a percentage of the resulting commission is self-dealing unless the client knowingly consents. Second, the add-backs he prepared are the same numbers that determine the price - and, under the proposed arrangement, his own fee. A person who benefits from a higher adjusted SDE has an incentive to be generous with add-backs. Even if his work was clean, the arrangement makes it look otherwise, and in a dispute the appearance is what gets litigated.

What you should do now. Disclose the relationship in writing to both sellers, describe the compensation precisely, and obtain signed informed consent or a written waiver. Recommend that each seller consult independent counsel or a separate tax advisor on the add-back schedules. Re-examine the two recasts with a second set of eyes, particularly any adjustment that is aggressive - personal expenses that were arguably business, family payroll, one-time income treated as recurring. If any add-back does not hold up, correct it and tell the affected buyer's lender before closing rather than after.

What you should not do. Do not pay a fee to a professional who was the client's fiduciary in the same transaction without that client's documented consent. Do not let a percentage-based fee sit on top of a number the fee recipient helped create.

A defensible structure has five elements.

1. Legal clearance first. Written opinion from licensing counsel in each state where you operate that a referral fee to an unlicensed CPA is permitted, and under what conditions (flat vs. contingent, disclosure, no involvement in negotiation).
2. Flat fee, not a percentage. A fixed amount per closed transaction, or a fixed annual marketing arrangement, breaks the link between the fee and the price or the closing. Percentage splits are the feature regulators and plaintiffs seize on.
3. Full written disclosure to the client, before engagement. The seller should see the sentence 'your accountant will receive $X from our commission if this transaction closes' in the listing agreement or a separate disclosure, signed. Buyer-side disclosure on the settlement statement as well.
4. Bright-line boundaries on Marcus's role. He may introduce and he may answer factual questions about the business's tax history with the seller's written permission. He may not show the business, discuss price or terms with a buyer, draft or interpret the purchase agreement, or hold funds. Those are brokerage acts.
5. A conflict screen. If he is the seller's accountant or advisor in a given deal, either no referral fee on that deal or explicit informed consent plus independent review of any financial schedules he prepared.

Refuse outright: cash or gifts off the books, fees paid after closing from an unrecorded pool, 'consulting' invoices that describe no work, and any request to keep the arrangement out of the listing file. Also refuse a fee where the referral source is the buyer's advisor and the seller is paying - that is a different conflict entirely and generally cannot be consented away.