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. 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 licence, 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, referral fee and commission
| Criterion | Finder's fee | Referral fee | Commission |
|---|---|---|---|
| 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 |
| Role in the deal | Introduces, then steps back | Introduces, then steps back | Often negotiates and closes the sale |
| How it is set | Fixed sum or percentage of the deal | Fixed sum or percentage of the sale | Usually a percentage of the sale |
| Licensing questions | Securities and real estate deals | Regulated sectors such as mortgages, credit or legal services | Depends on what is sold |
People use the three words loosely, and one contract can call the same payment by any of them. For the law, what counts is what the person does and how the pay is calculated. The SEC, for example, says it looks at the activities a person actually performs when deciding whether they act as a broker.
When a finder needs a licence
Securities and investors in the US
The Securities Exchange Act defines a broker broadly, as anyone engaged in the business of effecting securities transactions for others, and most brokers must register with the SEC. The SEC's guide to broker-dealer registration 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.
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).
Real estate in the US
State licensing law decides whether someone without a licence may be paid for finding a buyer or a seller. In Texas, the real estate commission says a license holder may not give an unlicensed person valuable consideration for referring a buyer or tenant, and in California a broker may not pay an unlicensed person for acts that require a licence. Fees for referrals to lenders, title companies and other settlement service providers on federally related mortgage loans fall under the RESPA ban on kickbacks. Our guide to real estate referral fees covers both.
Introductions in the UK
In the UK a finder is more often called an introducer. Introductions for consumer credit, mortgages and investments can bring the introducer under FCA rules: see introducer fees in the UK.
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 fixed sum 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 licence the deal requires, and the agreement says who discloses the fee where the rules require it.
- Confidentiality, taxes, governing law and signatures.
The referral agreement generator 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.
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. For typical levels by sector, see our referral fee rates by industry, which include a calculator.
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 (IRS instructions for Form 1099-NEC).
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).
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 fixed sum 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, when it is agreed in advance and the finder does not need a licence for what they do. In US securities deals, the SEC says finders may need to register as brokers, and states such as Texas and California restrict payments to unlicensed people in real estate.
Do I need a licence 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, finding buyers or sellers of property can require a real estate licence under state law, and in the UK some financial introductions are regulated by the FCA.
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.
How much is a typical finder's fee?
No regulator sets a standard rate. The parties negotiate a fixed sum or a percentage of the deal. Our referral fee rates by industry show the ranges we observe and include a calculator.
Is a finder's fee taxable?
Yes. In the US it is income for the finder, and a business that pays a non-employee $2,000 or more in 2026 generally reports it on Form 1099-NEC. In the UK, HMRC treats commission as taxable income, with the £1,000 trading allowance available for small amounts.
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.