QUESTION

Is it legal to give commission for bringing investment or business?

Asked on Feb 01st, 2014 on Corporate Law - California
More details to this question:
I have an LLC company in California. I know an Indian who can bring me clients and investors. The condition is, I am asked to pay a certain percent of the investment and a certain percent of the transaction for every client introduced by him. Is this legal? Can I pay a foreigner a commission for bringing me investors or for bringing me clients for my business? If yes, do I have to take any precautions?
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1 ANSWER

Real Estate Attorney serving Oakland, CA at Sack Rosendin LLP
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Lots of precautions. Clients and investors are very different categories. Investors give you property or money which you are going to use to operate a business, and the investors are going to share in the  profits. The interests in your business are securities. That's the definition of a security. All securities must be registered with the SEC, a lengthy and expensive process, unless the securities are exempt from registration. Many state have their own registration and exemption rules to protect investors who live in that state. Many of these exemptions require that no commissions be paid. So you really need to find an exemption which allows commissions and make sure you set up the investment to qualify for that exemption. If clients give you their money to invest for them in other businesses, you are an investment advisor or investment bank, which are heavily regulated industries. You and certain of your employees may be required to obtain the appropriate securities license, which may require hours of classes and passing a rigorous test. If you would like to discuss your proposed business and the legal way to set it up, please call me at 510-286-2200 or email me at ds@sackrosendin.com Dana Sack  
Answered on Feb 03rd, 2014 at 1:39 PM

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