What Should a Referral Partner Agreement Include, and How Do You Track Referrals?

By Bill Stilwell · Last reviewed October 16, 2026

The short answer

Write down how each partnership works before any referral, payment, or customer data moves between you. Cover who refers whom, what anyone gets paid and when, how the relationship is disclosed to customers, and what customer information can be shared. Then log every referral and what happened to it, so you know which partners send real work and what you owe or are owed.

What this means

Most referral partnerships start with a handshake. That’s fine until someone asks, “Where’s my referral fee?” or a customer finds out their information was passed along without asking.

A short written agreement answers the questions before they turn into arguments. It doesn’t have to be long. One or two pages can cover:

Referral terms. What counts as a referral, how it’s passed, and how fast each side follows up.
Sponsorship terms. If you sponsor an event or group, what you pay, what you get, and the dates.
Payment terms. Whether anyone gets paid, how much, when, and what triggers it, such as a paid invoice rather than a phone call.
Disclosure terms. If a partner gets paid or gets something of value for recommending you, customers may need to be told. The Federal Trade Commission (FTC) says a paid relationship that people wouldn’t expect should be disclosed clearly.
Data-sharing terms. What customer information you can pass, with the customer’s permission, and how each side protects it.

Say Coastal Pest Control and Clearview Window Cleaning agree to send each other customers. They agree Coastal pays $50 when a referred customer pays a first invoice, payments go out monthly, and they only pass a customer’s name and number after the customer says it’s OK.

Tracking is the other half. Every referral gets a row in a log: date, partner, customer, what they needed, whether it turned into a job, the job value, and any fee owed.

Why it matters

Unclear money ruins partnerships. Most partner fights are about who was owed what.
Taxes. The Internal Revenue Service (IRS) lists referral fees paid by one professional to another as something reported on Form 1099-NEC. For payments made in 2026, the instructions set the reporting threshold at $2,000 or more to a person in a year. Your accountant can confirm what applies to you.
Disclosure rules. The FTC’s Endorsement Guides treat commissions and other payments as a material connection that may need to be disclosed when a partner recommends you.
Privacy. Passing customer details without permission can break privacy laws and your own privacy notice, and it breaks the customer’s trust.
Regulated industries. In real estate settlement services and federal health care programs, federal law limits payments for referrals (see 14.7.1 Referral Partners).
No tracking, no decisions. Without a log, you can’t tell which partners are worth your time.

Who this applies to

Every business with referral partners, sponsorships, or co-marketing partners. A simple swap of referrals with no money still benefits from written terms about follow-up and customer data.

Pay extra attention if money or gifts change hands, you share customer contact details, or you work in a licensed or regulated field.

How to do it

Use one template for all partners. Ask an attorney to review it once.
Fill in the referral terms: what counts, how it’s sent (form, email, or text), and the follow-up deadline.
Fill in payment terms if any: amount, what triggers it, when it’s paid, and how. Paying on a customer’s paid invoice avoids paying for leads that never buy.
Collect a Form W-9 from any partner you’ll pay, before the first payment, so you have their tax information at year end (see 10.3.5 Information Returns).
Fill in disclosure terms. If a partner earns money or perks for recommending you, agree that they’ll tell customers in plain words, such as “We get a referral fee from Coastal Pest Control.”
Fill in data-sharing terms. Only pass what’s needed, only with the customer’s permission, and agree how each side stores and deletes it (see 11.2.7 Data-Processing Terms and 12.6 Communication Consent Records).
Add an end date or a way for either side to end the deal with notice.
Both sign and date it. Store it with your contracts.
Set up tracking. Add “Referral partner” as a lead source in your customer relationship management (CRM) system, with the partner’s name (see 15.8 Lead-Source Tracking).
Log every referral both ways, including the outcome and job value.
Once a month, total the fees owed and pay on time. Once a quarter, review which partners send real work.

What proof to keep

The signed partner agreement for each partner
Form W-9 for each partner you pay
The referral log with outcomes and fees
Records of each payment
Customer permission to share their information

Keep agreements with your legal records, payment records with your bookkeeping, and the referral log in your CRM or shared files.

Common mistakes

Handshake deals on money. Memories differ a year later. Write it down.
Paying on leads instead of paid jobs. You end up paying for people who never hire you.
No W-9 before paying. Chasing tax information in January is much harder.
Passing customer details without asking. Always get the customer’s OK first.
Partners hiding the payment. If they’re paid to recommend you, agree in writing that they’ll disclose it.
Not logging referrals you send. Partners notice when it only goes one way.
Never reviewing results. Some partners send nothing for a year. Your time is better spent elsewhere.

When to get help from a pro

Attorney: to review your partner agreement template, and before any payment arrangement in a regulated industry. Questions to ask:

Does this agreement cover payment, disclosure, data sharing, and how to end it?
Are referral payments allowed in my industry and state?

Certified public accountant (CPA): about recording and reporting referral payments. Questions to ask:

Which referral payments do I need to report on Form 1099-NEC?
How should I record referral fees I receive?

Bill’s note

[Bill: add a short story or lesson here. For example, a partnership that fell apart over an unclear referral fee, or the simplest partner agreement you’ve seen work.]

How I did this for SiteSmarty

[Date I did this:]
[What I actually did, step by step: the terms SiteSmarty uses with partners and how referrals are tracked]
[What it cost and how long it took:]
[What surprised me or what I’d do differently:]
[Screenshot or photo to add, with private info blurred: the partner agreement summary and the referral log]
[Result so far:]

Questions people ask

Do I need a written agreement with a referral partner? It’s the best way to avoid arguments. Even a one-page agreement covering referrals, payments, disclosure, and customer data helps.

Do I have to send a 1099 for referral fees? Possibly. IRS instructions list referral fees between professionals as reportable on Form 1099-NEC, with a $2,000 threshold for payments made in 2026. Ask your CPA what applies to you.

Do referral partners have to disclose they get paid? If they recommend you and get paid or get something of value for it, the FTC says that connection generally should be disclosed clearly.

Can I share customer information with a referral partner? Only what’s needed, only with the customer’s permission, and only if your privacy notice allows it.

How do I track referrals? Add each partner as a lead source in your CRM or a spreadsheet, and log every referral with the outcome and job value.

Audit check

Question: Does every partnership have written terms for referrals, payments, disclosure, and data sharing, and is every referral tracked with its outcome?
Pass looks like: A signed agreement for each partner. W-9s on file for paid partners. Disclosure terms in place. Customer permission before sharing data. A referral log with outcomes, job values, and fees paid.
Fail looks like: Handshake deals with money involved. No W-9s. Customer details passed without permission. No record of which partner sent which customer.
Evidence to collect: Signed agreements, W-9s, the referral log, payment records, and a sample of customer permission records.

Where this fits

Do this first: 14.7.1 Referral Partners, 15.8 Lead-Source Tracking

Do this next: 14.7.4 Co-Marketing

Sources

Internal Revenue Service (IRS), "Instructions for Forms 1099-MISC and 1099-NEC" (checked October 16, 2026)
Federal Trade Commission (FTC), "FTC's Endorsement Guides: What People Are Asking" (checked October 16, 2026)
Consumer Financial Protection Bureau (CFPB), "Real Estate Settlement Procedures Act FAQs" (checked October 16, 2026)

This page explains general rules and Bill's own experience. It is not legal, tax, or insurance advice. Talk to a qualified professional about your situation.