Inside: Considerations before engaging in fee-splitting agreements

Oftentimes, you are stepping into a liability landmine field without a proper safety sweep

A golden rule of business is to develop strong positive relationships. Arguably, one of the best types of business relationships is a mutually beneficial one. In the best of circumstances, all parties receive the benefit of a profit — akin to a symbiotic business relationship.

An example of such an arrangement is when two businesses refer each other their clients and share a portion of the fees generated from services rendered from the referral back to the referrer. For illustration, if an accounting firm refers a client to a law firm focusing in the practice of tax, and the law firm in turn shares a percentage of their fees generated from this referred client’s work with the accounting firm. This type of arrangement is generally called fee-splitting and potentially can be very profitable for the parties engaged in the practice. However, businesses should be wary of such a relationship because fee-splitting is not an unequivocally acceptable practice — in fact, the illustration just provided is actually prohibited!

Contributing Author

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Jefferey Ogden Katz

Jefferey Ogden Katz is a partner at The Patterson Law Firm, LLC. He is a leading litigation attorney and has handled numerous professional liability cases...

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