» Referral (Affiliate) Fee Agreement

Referral (Affiliate) Fee Agreement

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A referral fee agreement is between an affiliate that “refers” sales or services to a company in exchange for compensation. The fee paid to the affiliate is commonly a percentage (%) of the total sale or a flat fee per transaction. Leads may also be included in the agreement, for example, if the affiliate refers e-mail addresses to the company they may be able to receive compensation.

Independent Contractor Status – Most companies will require the affiliate complete IRS Form W-4 before administering payment.

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Table of Contents

What is a Referral Agreement?

A referral agreement outlines how an affiliate is to be paid for forwarding business to a company. Some referral agreements have tiered structures that pay a higher percentage (%) based on how much business is referred to the business. In addition, the company will usually define the rules for what constitutes a sale or lead.

Also known as a:

  • Business Referral Agreement
  • Client Referral Agreement
  • Commission Referral Agreement
  • Finder’s Fee Agreement
  • Marketing Referral Agreement
  • Partnership Referral Agreement

Online Referrals (Affiliate Programs)

Online referrals are when a company provides a link to a service or product they are selling online. This is common when a website has related content and recommends a product.

  • For Example, if a travel website recommends a hotel to its users by linking to booking.com. The affiliate program at booking.com provides a 40% commission on whatever visitors purchase on the site.

Top Affiliate Programs

The following are the top affiliate programs for an Advertiser or Publisher on the web:

Referral vs Reseller

The main difference between is a referral is simply recommending a product or service and a reseller is selling it themselves.

Difference Referral Reseller
Where does the Sale occur? On the main company’s website. On the Reseller’s website.
When is the Commission paid? In accordance with the referral agreement. At the time of sale.
Who decides Pricing? The main company. The Reseller.

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