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If you’re looking to join forces with another business to work together for a shared purpose, you might need a Revenue Share Agreement.
There are many ways to go about this: one could be a revenue share model, or a profit share model. It really depends on what works for both businesses.
Why Do I Need A Revenue Share Agreement?
The contents of a Revenue Share Agreement will vary according to industry or the purpose for which the businesses are coming together.
This is particularly important if each business is bringing very different things to the partnership. If you have your arrangement in writing, it saves you from disputes further down the line.
Revenue Share Agreements are especially useful when you’re entering a more short-term arrangement, or when you’re not ready to incorporate your partnership with the other business.
What’s In A Revenue Share Agreement?
Revenue Share Agreements will typically set out the following terms:
- Parties’ rights: Under your arrangement, it is important to set out the rights and responsibilities of each party and what they will bring to the table in your partnership.
- Management and auditing: How will the partnership be managed or administered? Will the parties have the ability to audit each other?
- Costs and revenue share: How will the revenue be distributed or shared between the parties?
- Timeframe: How long will the arrangement last for? Is it for a fixed term or is there no end date?
- Intellectual property: it is important to make sure that your intellectual property is protected, especially if your business partners have access to your systems and controls. This term also is necessary to make sure that the IP that is created in the course of the revenue share belongs to the appropriate party
- Dispute resolution: This term will spell out how disputes will be resolved between parties
- Liability: Who will be responsible for any losses or damages that the revenue share arrangement incurs?
- Termination: How can parties exit the revenue share arrangement?
Example Of A Revenue Share Agreement
Leslie runs a small bakery where she sells her baked goods online. Leslie meets Ann, who is passionate about vegan food and sustainable packaging.
Leslie and Ann decide to launch a revenue share arrangement where they will work together to sell vegan baked goods in sustainable packaging.
Leslie and Ann agree to get a Revenue Share Agreement in place to ensure that their deal is in writing, and so they know how much each of them gets from their partnership.
This will make sure that they are aware of their terms before they formally enter their partnership.
Get In Touch
It’s important to make sure that your revenue share arrangement is in writing before you pursue your business partnerships.
If you’re looking for a Revenue Share Agreement, or legals for your business, get in touch at team@sprintlaw.com.au or 1800 730 617!
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