Paying Commission

msnorstar

New Member
15
Hi everyone,

I have a friend that knows many people; he is very popular. I was thinking about talking to him about referring people over. People only help out if they have an incentive, so I was thinking about paying him a certain percentage out every commission check I receive as a result of each referral. Does anyone have any suggestions as to how I can pay him? Should I pay him cash? check? How much percentage should I pay? What would be the tax consequences or what would I need to do to avoid tax problems? Should I list him as an employee? By the way, most of the referrals would be for trucking insurance and liquor stores, etc.

Thanks. I appreciate any advice
 
rebating isnt allowed or commission to unlicensed isnt allowed

you can pay him a small fee if its based on the numbers of referral not contingent on purchasing the policy or not.
 
Building on the above, tell him to send some folks your way and you'll take care of him. If it ends up being anything appreciable to the point where you have tax considerations, you need to get him licensed.
 
To pay him much he needs to be licensed. As far as taxes are concerned if you pay him more than $600 per year (I think) you need to issue him a 1099. Then it is up to him as far as taxes are concerned.
 
A flat-fee for referral could also work. But, at least in my state, the referral fee has to be paid once an app is submitted, not if the policy is issued. This was according to my manager at least. But if he is doing a lot of it then get him licensed, just because it makes it easier for him to talk to prospects about the insurance. It can be hard to get a referral without talking about some things in insurance and that is tricky without an license.
 
Thanks for the replies. I was thinking about appointing him with a CSR title in my agency and just pay taxes to keep things legal, just to be safe.
 
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