A finder's fee is a payment to someone who finds a party for a deal, such as a buyer, a seller, a client or an investor, and leaves the negotiation to others. The parties agree it in advance as a flat amount or a percentage of the deal, and it is usually paid when the deal closes.
A finder's fee agreement sets who is being introduced, how much the fee is and when it becomes due. In securities deals and in real estate, a finder who is paid on the outcome of the deal may need a license (SEC, Texas Real Estate Commission), so check that before anything else.
Key takeaway: Agree the fee in writing before you name anyone, and make the agreement say what counts as your introduction and how long it stays valid. If the deal involves securities or real estate, check the licensing rules first: the SEC says finders may need to register as brokers, and pay that depends on the outcome of the deal is one of the signs it looks at.
Finder's fee vs referral fee, commission and broker's fee
The Legal Information Institute at Cornell Law School describes a finder's fee as a commission paid to someone who identified or facilitated a deal between parties that would not have dealt without that help, and notes that the buyer, the seller or both may pay it under their agreement (LII, finder's fee). It describes a broker as an independent intermediary who arranges contracts between a buyer and a seller for a commission (LII, broker).
| Criterion | Finder's fee | Referral fee | Commission | Broker's fee |
|---|---|---|---|---|
| What earns it | Finding a party for a specific deal: a buyer, a seller, an investor | Introducing a customer or client to a business | Making or closing a sale | Arranging the deal between a buyer and a seller |
| Role in the deal | Introduces, then steps back | Introduces, then steps back | Often negotiates and closes the sale | Acts as intermediary, often through negotiation and closing |
| How it is set | Flat amount or percentage of the deal | Flat amount or percentage of the sale | Usually a percentage of the sale | Usually a percentage of the deal |
| Licensing questions | Securities and real estate deals | Regulated sectors such as mortgages, credit or legal services | Depends on what is sold | Securities, real estate and other brokered markets |
People use these words loosely, and one contract can call the same payment by any of them. For licensing, what counts is the work the person does: the SEC says it looks at the activities a person actually performs when deciding whether they act as a broker (SEC, Guide to Broker-Dealer Registration).
How a finder's fee is calculated
A finder's fee is a flat amount or a percentage, and the agreement names the base the percentage applies to: the sale price, the amount invested, the first-year contract value or the amount actually received. Some agreements use a sliding scale, where the percentage falls as the deal grows, or set a minimum fee.
We found no official source that sets a standard finder's fee percentage, so this page does not quote a range. The rates we observe by sector are in our guide to referral fee rates, which includes a calculator.
In securities deals the method of payment also matters for licensing. The SEC lists compensation that depends on, or is related to, the outcome or size of the transaction among the signs that a person may need to register as a broker (SEC, Guide to Broker-Dealer Registration).
Example calculation
Example with round numbers, for illustration only: a finder introduces a new client to a software company, and the client signs a contract worth $200,000 in its first year. The agreement sets 5% of the first year's contract value, so the software company owes the finder $10,000, payable within 30 days of the client's first payment if that is the trigger the agreement names. With a flat fee instead, the agreement could set $5,000 per signed client, whatever the size of the contract.
Is a finder's fee legal? When a finder needs a license
Finder's fees are used in many industries, from finding investors for new businesses to real estate and mergers and acquisitions, and their terms are usually set by agreement between the finder and the payer (LII, finder's fee). The limits come from licensing law, covered below for securities, real estate, mortgage settlement services and the UK.
Securities and investors in the US
Section 15(a)(1) of the Securities Exchange Act makes it unlawful for a broker or dealer to use the mails or interstate commerce to effect, or to induce or attempt to induce, a securities transaction unless it is registered with the SEC, subject to limited exceptions (15 U.S.C. 78o(a)). The Act defines a broker as any person engaged in the business of effecting transactions in securities for the account of others, and the SEC's guide names finders among the people who may need to register, depending on the facts, for example when they find investors for companies issuing securities, find investors for venture capital or angel financings, or find buyers and sellers of businesses where securities are involved (SEC, Guide to Broker-Dealer Registration).
The guide lists questions that point towards broker status, such as whether you take part in solicitation or negotiation, and whether your compensation depends on the outcome or size of the deal. It says a yes to any of them indicates that you may need to register (SEC guide).
The paying side is covered too. FINRA Rule 2040 bars member firms and their associated persons from paying compensation to a person who is not registered as a broker-dealer but, because of those payments and the activities behind them, would be required to register (FINRA Rule 2040).
Since 2023, section 15(b)(13) of the Exchange Act exempts some M&A brokers who help transfer ownership of an eligible privately held company, but the exemption does not apply to a broker who, for example, holds the parties' funds or securities or binds a party to the deal (15 U.S.C. 78o(b)(13)).
Real estate in the US
In real estate, state license law decides, and Texas is a clear example: the Texas Real Estate Commission says a license holder may not pay an unlicensed person valuable consideration for referring a potential buyer or tenant, citing its Rule 535.20(a), and it treats gifts of merchandise worth $50 or less as outside that ban (Texas Real Estate Commission).
In California, section 10137 of the Business and Professions Code makes it unlawful for a licensed real estate broker to compensate, directly or indirectly, a person who is not licensed for acts that require a real estate license (Business and Professions Code, section 10137).
Check the license law of the state where the property is before you agree a fee. Our guide to real estate referral fees covers agent-to-agent referrals in more detail.
Mortgage and settlement services: RESPA Section 8
Section 8(a) of the Real Estate Settlement Procedures Act bars anyone from giving or accepting a fee, kickback or thing of value under an agreement to refer business tied to a real estate settlement service on a federally related mortgage loan (12 U.S.C. 2607(a)). The same section allows payments under cooperative brokerage and referral arrangements between real estate agents and brokers (12 U.S.C. 2607(c)).
A violation can lead to a fine of up to $10,000, up to one year in prison, or both, and to liability for three times the amount paid for the settlement service (12 U.S.C. 2607(d)).
Introductions in the UK
In the UK a finder is more often called an introducer. Introducing an individual to a lender with a view to a regulated credit agreement is credit broking under article 36A of the Regulated Activities Order (RAO, article 36A), and section 19 of the Financial Services and Markets Act 2000 bars anyone who is not authorised or exempt from carrying on a regulated activity in the UK (FSMA, section 19). Our guide to introducer fees in the UK also covers mortgages, investments and legal services.
Taxes on a finder's fee
A finder's fee is income for the finder. In the US, IRS Publication 525 says side commissions and similar payments must be included in income, on Schedule C when they come from self-employment, and gives the example of commissions paid for referring customers (IRS Publication 525).
A business that pays a finder who is not its employee $2,000 or more in fees or commissions in 2026 generally reports it on Form 1099-NEC, and the IRS lists referral fees among the examples of reportable payments (IRS instructions for Forms 1099-MISC and 1099-NEC). The threshold was $600 for payments made in 2025 (IRS instructions, April 2025 revision), and the IRS says the new $2,000 amount may be adjusted for inflation from 2027 (IRS instructions, What's New).
In the UK, HMRC gives commission as an example of miscellaneous income, and individuals can use the £1,000 trading allowance for small amounts (HMRC helpsheet HS325).
What a finder's fee agreement should include
- The parties: names, addresses and company numbers.
- The mandate: what the finder is looking for, such as a buyer for a business asset, clients for a service or a supplier, and whether the arrangement is exclusive.
- What counts as an introduction: a party named in writing who was not already in contact with the client. A dated list of names avoids arguments later.
- The fee: a flat amount or a percentage, and the base it applies to, such as the price, the first-year contract value or the amount received.
- When the fee is earned: signed contract, closing or payment received, and the payment deadline.
- The tail period: whether the fee is still owed if the deal closes after the agreement ends, and for how long.
- The finder's role: introductions only, with no authority to negotiate or sign. This clause also matters for the licensing questions above.
- Compliance: each party confirms it holds any license the deal requires, and the agreement says who discloses the fee where the rules require it.
- Confidentiality, taxes, governing law and signatures.
Our referral agreement template gives you a first draft with the parties, the fee, the trigger, the payment deadline, the validity of an introduction and the period after the end of the agreement. Add the mandate and the compliance clause, then have it reviewed.
Once the agreement is signed, keep a dated record of each introduction: it is your evidence if the client later says it already knew the party. Referaly's referral partner software stores each introduction with its date, status and agreed fee.
Frequently asked questions
What is a finder's fee?
A finder's fee is a payment to someone who finds a party for a deal, such as a buyer, a seller, a client or an investor, without negotiating the deal. It can be a flat amount or a percentage of the deal, and it is normally paid when the deal closes.
Is a finder's fee legal?
In many situations, yes: finder's fees are used in many industries and their terms are set by agreement (LII). The limits come from licensing law. In US securities deals the SEC says finders may need to register as brokers (SEC guide), and in real estate states such as Texas (TREC) and California (Cal. Bus. & Prof. Code 10137) restrict payments to unlicensed people.
Do I need a license to receive a finder's fee?
It depends on the deal. Finding investors or buyers in deals involving securities can require broker-dealer registration in the US (SEC guide), finding buyers or sellers of property can require a real estate license under state law (Cal. Bus. & Prof. Code 10137), and in the UK introducing an individual to a lender for regulated credit is credit broking, a regulated activity (RAO, article 36A).
What is the difference between a finder's fee and a referral fee?
The two overlap. A referral fee usually rewards introducing a customer to a business, and a finder's fee usually rewards finding a party for a specific deal, such as a sale, a financing or a large contract. For licensing, what counts is what the person does and how the fee is calculated (SEC guide).
Is a finder's fee the same as a broker's fee?
The roles differ. A finder brings the parties together and steps back, while a broker arranges the contract between buyer and seller as an intermediary (LII). In US securities deals, the SEC treats taking part in negotiation, or being paid on the outcome or size of the deal, as signs that a person may need to register as a broker (SEC guide).
What is a typical finder's fee percentage?
We found no official source that sets a standard finder's fee percentage. The parties negotiate a flat amount or a percentage of the deal, and our guide to referral fee rates shows the rates we observe by sector, with a calculator.
Can you pay a finder's fee in real estate?
It depends on the state and on the service. In Texas a license holder may not pay an unlicensed person valuable consideration for referring a buyer or tenant (TREC), in California a broker may not compensate an unlicensed person for acts that require a license (Cal. Bus. & Prof. Code 10137), and RESPA Section 8 bans referral fees tied to settlement services on federally related mortgage loans, with an exception for cooperative brokerage and referral arrangements between agents and brokers (12 U.S.C. 2607).
What should a finder's fee agreement include?
The parties, what the finder is looking for, what counts as an introduction, the fee and its base, when the fee is earned and paid, the tail period after the agreement ends, a clause limiting the finder to introductions, a compliance clause on licenses, and confidentiality, tax and governing law terms. Our referral agreement template gives you a first draft.
Is a finder's fee taxable?
Yes. In the US it is income for the finder (IRS Publication 525), and a business that pays a non-employee $2,000 or more in 2026 generally reports it on Form 1099-NEC (IRS 1099-NEC instructions), up from $600 for payments made in 2025 (IRS, April 2025). In the UK, HMRC treats commission as taxable income, with the £1,000 trading allowance available for small amounts (HMRC HS325).
This page gives general information and is not legal or tax advice. Securities and real estate rules depend on the deal and on the state, so have your agreement reviewed by a lawyer before you rely on it.