Understanding the tax implications of buying or selling a practice – The revenue-sharing agreement

Succession Planning

Understanding the tax implications of buying or selling a practice – The revenue-sharing agreement

The fourth in a five-part series about the decision process when buying or selling a business

The Revenue-Sharing Agreement

Often only in employee/employer or other fact-specific situations are practices transitioned via a revenue-sharing arrangement. The most common occurrence, outside of the employee/employer relationship, is where two parties have entered into a written business continuity arrangement (for death, disability, and in some instances retirement purposes). For the purposes of this discussion we will focus on a situation in which the advisor is permanently disabled and no longer licensed or active in the business. In this case, pursuant to the terms of the written business continuity agreement, the new advisor takes over the servicing of the client accounts and shares the subsequent revenue with the disabled advisor for a period of years (see FINRA Rule 2040).

Click here to download a printable PDF of the Revenue-Sharing Case Study.


This information likely does not address the implications of each specific transaction. Please be aware that this information is intended to provide an overview only and is not a substitute for specific transaction guidance from an attorney, certified public accountant, enrolled agent or other subject matter expert. For specific transactional related advice, please consult with your own tax and/or legal counsel.

CIRCULAR 230 NOTICE: To comply with U.S. Treasury Department and IRS regulations, we are required to advise you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this transmittal is not intended or written to be used, and cannot be used, by any person for the purpose of (i) avoiding penalties under the U.S. Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this document or other related materials.



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