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Newbie question: Referral fee legal or more trouble?

by newtocopywriting
6 replies
I am in the process of starting up my freelance copywriting business. I have another business providing non-writing services.

My client at the non-writing services business heard about my wanting to start a freelance copywriting business and offered to help me with referrals. She wants to put a link to my copywriting business on her website. And she wants to verbally refer me to her clients. She asked for a referral fee. Her clients have the potential to be good referrals for me as they may be in need for copywriting services.

However, I've heard all kinds of cons about referral fees: it's a kickback, it's unethical, takes away the value of your services, and something about the government wanting to regulate this somehow in the future.

I want to avoid as much confusion for me at the onset. And I want to make sure I meet all legalities. Do you know if legally some type of filing is involved other than keeping track for taxes? And if you have referral fees, do you offer a set fee or a percentage? If so, how much on the average? Or is there an alternative option I'm not considering? (Please keep in mind that a reciprocal link on our sites won't do much for her as my businesses do nothing to help her find clients for her business.)

Any comments will be most appreciated! Thanks.
#fee #legal #newbie #question #referral #trouble
  • Profile picture of the author Drez
    Some licensed professional or other industries may regulate or actually forbid referral fees (like accountants?).

    However, in general I think it's totally okay to do.

    If your friend want to be completely ethical she should disclose that she's and affiliate.

    This is the same thing we all do when we're affiliates (as per FTC guidelines).

    One other thing.

    Do you have some way of knowing which leads were referred by your friend? You don't want to get into a squabble over what your friend THINKS is due them.

    However ... as always, I'm not a lawyer nor qualified to give (what may be perceived to be) legal advice. Talk to the appropriate professional.
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    • Profile picture of the author newtocopywriting
      Thanks for the quick response, Drez. It helps to know some industries forbid it. And the mention of the FTC guidelines is something I'll look into now, too. I'll also try to find an attorney to ask this question, too.
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      • Profile picture of the author adamlantelme
        Like Drez said, it might and might not be a legal issue.

        For instance, I know a physician and he refers a lot of people to the compounding pharmacy in the area. It began to look unethical, because the physician and pharmacists appeared to have close affiliations, and medical directors sought to question the intentions of the physician.

        Fact of the matter is, the Doctor sends his patients there because he needs the pharmacy to make the medicine, as they aren't provided by major vendors. They are the only one who provide such medications, so even though it might appear as though this is a kickback, it in fact is a matter of necessity.

        This could be seen as a conflict of interests.

        In your situation, depending on your friends occupation, it might be such. If on the other hand they are just looking to help you out, take the help!

        A lot, and I do mean a lot of business is predicated on referrals( and their fees.) Think of a tire shop that refers you to a an alignment specialist.

        For you, if you're concerned about paying out, well imagine what would happen if you didn't have the job in the first place. This is money that would otherwise not be in your pocket.

        Your friend sounds like they are trying to help you out, and get some action on the side. Hardly nefarious, and could be very beneficial to you as well. It's hardly unethical, unless you are doing something that could be construed as unethical, i.e. selling a bunk service.

        And of course the government wants their paws in everything. Pay your taxes, keep tight records, and make sure that you aren't doing anything that feels like it is breaking the law.

        It would probably be easiest just to give her a set amount for her referrals, and yes, do make sure that there is a way for her to track them.

        Just my 2 cents.

        All the best,

        Adam
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        • Profile picture of the author RickDuris
          Personally, I never pay money for referrals. It implicitly puts a dollar value on the relationship. Personally I think it kinda crass. But that's just an opinion.

          That said, I do acknowledge someone's contribution in other ways.

          I get more of a kick surprising people if they've gifted me in some way. Those who know me, know I can be pretty creative.

          I've always felt that experiences and collecting memories that last an eternity are worth way more than money.

          And if you can be a catalyst for one, it will be more appreciated.

          - Rick Duris

          PS: You have to careful with my strategy, because your friends will return in kind.
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          • Profile picture of the author newtocopywriting
            Thanks for the responses. This helps me.

            Also I read something recently from the FTC that said the referrer needs to state on their site they are getting a fee for this referral. That changes my thinking on this entirely.

            Appreciate the help.
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  • Profile picture of the author CopyAcolyte
    Why would it be illegal let alone unethical to charge a referral fee? No one is forcing your hand.
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