How to legally run a senior rep program in your photography business

How to legally run a senior rep program in your photography business

Wahoo! You’re getting your Senior Representative program (Senior Rep Program) set up and going – full with a contract, representative education and motivation.  One of the trickiest parts of implementing a Senior Representative program to promote your senior portrait photography business is identifying the incentives.

The laws in this post were evaluated as of March 30, 2014 and are based on United States law.

 

What is a Senior Representative Program?

Senior Rep programs are marketing programs set up by photographers to help expand their Senior Photography network (for foreigners reading and unaware- that’s high-school or college-aged seniors, not senior citizens – although perhaps you could get some nursing homes on board with these too!)

In essence, this is a formalized referral program targeted at seniors in high school! (or Juniors, depending on the time of year!)

 

Senior Representative Offerings

Here are some ideas of things you can offer as incentives/awards to your Senior Representatives – just don’t forget the guidelines listed!

 

Senior Rep Contract Kit: Kick off your Senior Rep program with confidence in the forms you're using

 

The Governing Law

Yes, this is the boring stuff to you but for purposes of the legalities in advertising through Senior Representatives we are looking at Section 5 of the Federal Trade Commission Act (15 U.S.C. 45).  Specifically, this is the use of endorsements and testimonials in advertising (so this encompasses Senior Representatives and any other client testimonials you use in marketing).

The goal of this law is to make unfair methods of competition unlawful.  Level the playing field, ya know?

 

And this means what?

The law itself has lots of parts – including organization and expert endorsement – but for the evaluation of a Senior Representative here are some highlights for you. 15 U.S.C. 45

  • Endorsements must reflect the honest opinions, findings, beliefs, or experience of the endorser. Furthermore, an endorsement may not convey any express or implied representation that would be deceptive if made directly by the advertiser.
  • When the advertisement represents that the endorser uses the endorsed product, the endorser must have been a bona fide user (real or genuine – so not a fake user!) of it at the time the endorsement was given.
  • When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed.

 

Senior Representative Example

A senior graduate signs on board to be an official member of your Senior Photography Representative team for this year.  Within this program each senior graduate receives a particular reward each time they talk about your business and/or gain new clients for you.

As listed above, the incentives provided materially affect the weight or credibility of the Senior Rep’s endorsements of your business, so whenever they discuss you or a referred client comes to you – you must clearly an conspicuously disclose the fact that referral awards are being given.  It is your responsibility to ensure that these disclosures are provided. Not the senior graduate.

They must be genuine and honest endorsements and be made by a real Senior Representative – but that is just common sense right?

 

So why does this matter to me?

Practices inconsistent with the FTC guidelines may result in corrective action by the Commission under Section 5 if, after investigation, the Commission has reason to believe that the practices fall within the scope of conduct declared unlawful by the statute.

You can get in trouble.  Fined.

 

How to do this?

Always disclose to the referred client the relationship between your business and the Senior Representative.  Although it may seem common sense for the referred client to see the relationship, it is still your responsibility to tell them.

 

Does cash as an incentive bring about any other requirements?

Tapping into an IRS mind – this is what is found about cash (and other equivalent incentives). A Form 1099 must be filed by you, the payor, whenever payments to the recipient during the calendar year are $600 or more combined PER individual (remember one 1099 per individual is given). This form reports the total value of property (cash, gift cards, etc.) transferred to the Senior Representative.

Keep in mind an under-age Senior Rep can’t sign your rep agreement due to their minor status – it would be the parent/legal guardian who signed on their behalf – so this is given to the parent/legal guardian. If they are over-age, then it’s a clear cut giving of the 1099 to the Senior Rep.

 

What if I do a gift card or other product/service instead?

The Senior Rep (or parent/legal guardian) has received this gift card in exchange for services (talking about you and referring your business!)  For tax purposes it is treated no different than if cash had exchanged hands.

The incentive payment through a gift card in exchange for their referrals is still subject to tax liability  – whether in form of debit card or to a specific store.  These result in taxable compensation to the representative (or parent/legal guardian as mentioned above) when they receive it.

Note: You only need to send a 1099 for actual payment in cash (cash gift cards count), but not in product.

For full information talk to your CPA.

 

Senior Rep Program Resources

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