Texas Finders Fee Laws

By Jonita Davis

A finder is someone who makes a connection between you and something or someone that you could not contact on your own. The finder's fee is the payment for such a service. In the state of Texas, there is a limit to the types of activities that can be considered eligible for a finder's fee. The state also incorporates limits on the fees.

Legal Finders

Finder's fees are paid for bringing investors together with the company issuing securities, or finding the heirs to an estate. They are also used to find people, a job that is commonly left to private investigators. Finders also connect corporations with the best applicants for open positions. In class-action lawsuits, finders are used to connect clients with the attorneys. This finder can opt to receive payment from the class action settlement or judgment at the end of a case, according to the Texas Civil Practice and Remedies 6.141.002.20. Other finders collect their fees from the clients who hired them.

Registration

Under the Texas state laws, the finder must be registered with the Texas Department of Public Safety, Private Security Bureau. Finders are considered similar to private investigators and cannot practice until registered within the state. The state requires that you complete an application and submit it to the department, along with the applicable fee amount (found on the application). The result of registration is a license. The individual, the company and employees must be registered. The process can take up to two months to complete. Before taking your first job, you must also apply for a sales tax permit.

Limits

The Texas Property Code, Section 74.507, limits that amount a finder to 10 percent or less of the property found for an heir or the owner of an abandoned property. The value of the property dictates the fee. The Texas Securities Commission limits finders who connect investors and securities issuers to a fee for the finding process only. This finder is not entitled to a percentage of the securities purchased or on any profits that the new investor makes. Investment finders are also prohibited from giving investment advice.

Illegal Collection

Real estate brokers cannot collect a finder's fee for directing a client to a certain lender or home inspector. Doctors can't collect a finder's fee for referring a patient. Under the Texas Securities Commission rules, a finder cannot hold dual roles. It is a conflict of interest that the state does not allow. In addition, Texas state employees and officials cannot pay finder's fees out of proceeds from charitable events and fundraisers.

About the Author

Jonita Davis is freelance writer and marketing consultant. Her work has appeared in various print and online publications, including "The LaPorte County Herald Argus" and Work.com. Davis also authored the book, "Michigan City Marinas," which covers the history of the Michigan City Port Authority. Davis holds a bachelor's degree in English from Purdue University.

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