Who should I consult regarding commission distribution and partnership?

I've worked with an outsourced team for some time. We develop digital products and sell it online and split the commission. Every product is priced differently and every product has different owners with different percentage of commission. Now, we want to take our partnership to next level and simplify things, but there are few complex questions before we can proceed. There are 4 partners (ex John, Joe, Brian, Tom). John - Project Manager - Commission Only Joe - Product Manager - Commission Only Brian - Lead Designer - Commission + Salary Tom - Lead Developer - Commission Only Example Products Item A - Earning $50/sale [John (60%), Joe (40%)] Item B - Earning $25/sale [Brian (60%), Tom (40%)] Item C - Earning $15/sale [John (30%), Brian (60%), Joe (10%)] Now what we want, is that every partner should have some percentage in every product so he doesn't feel left out on any product that might sell better than others. Also, some of the partners might also take a salary, so how should we decide what should be the commission with salary? There are other questions too that need to be answered related to above and I don't know who to consult with, whether it be a financial advisor, an accountant or an attorney. Please advise.


Your problem is one of corporate structure.

You need to create an organization chart and define the different roles that exist in the business.

You then need to fill in your names to each box.

The different roles may have salaries or commissions attached, likewise, each partner is likely going to have their names appear in the 'board of directors' box but they could also exist as 'licensing partners' outside the structure if they're due revenues from previous work contributed.

Give me a call if you want me to walk you through this process.

Once done, each person will know what roles they play at any given time and what their compensation will be.



Answered 8 years ago

Do these people have any shares in the business or are they contractors only?

If they are contractors and will remain so, I think you as the company owner have control over how the commissions are split. I'm not a lawyer so I can't say for sure and this is not legal advice.

I would start with a transparent conversation with them and explain the reasons why you need to do this. Get their input and make them feel like they are contributing to the solution.

Yes, you'll need an attorney to draft up all of the contract/employment agreements but first you need to narrow down a few options that will work for your business.

Answered 8 years ago

I'm not sure you need an attorney, financial advisor, or an accountant.

In short, you need to determine what is fair to you and the partners.

Without knowing the exact factors you feel are complicating this payout system, it is impossible to give you actionable advice.

For example, why are John, Brian, and Joe all receiving commission on Item C?

Perhaps a simple quarterly profit share agreement is more appropriate? Or, for those not directly involved in the sale, perhaps a flat percentage on items sold and the remaining is split between the sales team members.

I am happy to help, feel free to schedule a call or shoot me a message.


Answered 8 years ago

If you are considering going into business as a partnership, then you’ll need to be prepared to split the profits. Before you make any decisions about splitting profits, talk to a lawyer about the best way to legally structure your business. The simplest route is to form a “general partnership”, simply register your “doing business as” name and open a bank account in the business’ name. Professional partners, such as lawyers or accountants, are often advised to go this route since it protects the business owners from personal liability for the debts or liabilities incurred by the partnership. For example, if you run into a cash flow issue and your business fails, neither partner will be personally liable for any debts owed to creditors. Another option is a “limited partnership” in which one partner invests in the business but does not manage it, leaving that task to one or more of the other partners. In a business partnership, you can split the profits any way you want–if everyone agrees. Remember, in an equal partnership neither partner can decide without the other’s approval, whereas in a 51-49 ratio, for example, one partner has final authority. Whatever you decide, it is a good idea to create a profit-sharing agreement and make it part of your larger partnership agreement. A partnership agreement is the business version of a prenuptial agreement and should be completed before you start operations, and any profits are made. Although an agreement is not legally required, it can protect your interests as one half of the partnership for the duration of your partnership and through its dissolution.
Besides if you do have any questions give me a call:

Answered 3 years ago

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