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Profit Sharing Agreement - Standard

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Prepared for:
[Company One Name]

Prepared by:
[Company Two Name]

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Profit Sharing Agreement

This Profit-Sharing Agreement is between [Company 1 Name], (hereinafter referred to as "Party A"), residing at [Company 1 Address] shall be entitled to [00.00] % profit and [Company 2 Name], (hereinafter referred to as "Party B") residing at [Company 1 Address] shall be entitled to [00.00]%.

This Profit Sharing Agreement is made on [Date] and cites the purpose of both the Parties coming together with the common goal of doing the business of [Business Name] [Add More Business Names] (hereinafter referred to as "Business") located at [Business Address].

Both the Parties are strongly advised to carefully read all the terms and conditions of this Agreement, as these define the rules and regulations of the Business for both the Parties. 

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Terms and Conditions

The Parties hereby agree to the following terms and conditions that shall define and govern the relevant aspects of this Profit Sharing Agreement.

1. Purpose 

The prime purpose of this Profit-Sharing Agreement is to set the guidelines and describe a method to share the Business revenues among the Parties, that are fair, workable, and acceptable to both the Parties.

2. Term

This Profit-Sharing Agreement shall commence on the date [Date] and remain in full force and effect for an initial period of [Number of Years] years. At the end of the initial term, this Agreement will automatically renew in one-year (each, a “Renewal Term”), unless otherwise terminated by either of the Parties in writing and in accordance with the terms for termination stated in this Agreement.

3. Responsibilities 

Both the Parties are hereby responsible to ensure and perform the following duties:

Maintenance of co-ordination and other prospecting duties with regard to each other; and
Timely completion of paperwork as required for the smooth working of the business; and
Performance of all duties and services that may be assigned by either of the Party to accomplish the aims of this Agreement in the time, place, and manner deemed appropriate by the mutual consent of the Parties.
[Add More]

4. Profit-Sharing

In consideration of the duties performed by both Parties, Party A that is, [Name] shall be entitled to [00.00]% of the profits earned from the Business.

In consideration of the duties performed by both Parties, Party B that is, [Name] shall be entitled to [00.00]% of the profits earned from the Business.

To be considered a “direct result” of either Parties' efforts, substantially all the contact with a customer that leads to a sale should have been made by that particular party only. Although initial contact and contact at the sale point shall be factors to consider.

“Profits” shall be deemed to be calculated by the selling price; less any expenses by the Business paid on behalf of both the parties in furtherance of the sale and the cost of goods sold.

5. Payouts

Given below shall be the standard responsibilities of the Parties in terms of Payouts and Profit-Sharing in order of financial distribution, based on every project or job. No payouts shall be given until the balance of the said project or job is paid in full.

Business	Percentage of Total Profit
[Project/Job Name]	[00.00]%
[Project/Job Name]	[00.00]%

6. Liability

Each Party acknowledges that it shall be responsible for any loss, cost, damage, claim, or other charges that arise out of or is caused by the actions of such Party. 
Neither Party shall be liable for any loss, cost, damage, and/or claims, that arise out of or are caused by the actions of the other Party. 
Joint and several liabilities will not attach to the Parties; no Party is responsible for the actions of any other party but is only responsible for those tasks assigned and outlined in the Agreement. 
The Parties agree that consequential or punitive damages may be applicable or awarded with respect to any dispute that may arise between or among the Parties in connection with this Agreement.

7. Independent Contractor

Both the Parties hereby agree that neither of Parties works under the other, that is, the Parties shall be considered Independent Contractors and not the agents or employees of the other Party. Neither of the Parties shall have the authority to make any such statements, representations or commitments, nor to take any action which shall be binding or offending the other Party, except as may be expressly provided or authorized in writing.

8. Confidentiality

Neither Parties involved in this Profit-Sharing Agreement shall, in any manner, either directly or indirectly :
Disclose or communicate to a third party any information relating to the Business of the Parties including but not limited to customer lists, price points, marketing plans (the “Confidential Information”), yearly revenues, or any other private information.
Duplicate any kind of Confidential Information.
Use any of the Confidential Information other than solely for the benefit of the Business.

9. Expenditures

Neither of the Parties shall be entitled to any reimbursement of any kind of expenses except those that have been previously approved in writing by both the Parties. Should the Business require travel by the Representative of either of the Parties, then that particular Party shall reimburse its Employee for such travel expenses, along with reasonable lodging and meal expenses after the presentation of receipts of such expenditures.

10. Termination

Either Party shall have the right to terminate this Agreement, effective as of the end of the Initial Term or any Renewal Term, by providing the other with written notice of termination at least thirty [Number of Days] days prior to the end of such Initial Term or Renewal Term. Neither of the Parties shall have the right to terminate this Agreement at any other time unless such termination is mutually agreed upon to by both the parties. The profit sharing among the Parties shall terminate upon the termination of this Agreement, as soon as the rules of termination are followed and executed.

11. Relationship of Parties

It is understood and agreed by the Parties that this Agreement does not create an employer-employee relationship, a partnership for tax purposes, or for any other reason. The Parties confirm that they will observe the laws of their respective jurisdictions. 

12. Taxation

Each Party will be fully responsible for their own taxation and provide a declaration that the funds shall not be used for any illicit or illegal activities covering any existing law. Some of the notable inclusions are money laundering, evasion associated with international laws, money transfer policy for the avoidance of debt. No Party of this Agreement shall be liable for any tax payments required by any and all governing authorities for any other participating party.  

13. Non-Exclusivity Clauses

The relationship between the Parties is non-exclusive, which means that no Party is under any obligation to submit transaction opportunities to the other Party in this Agreement for the procurement of financing and re-sale, or presentation to a Buyer. Each transaction shall be managed on a case-by-case basis. Once the Parties agree to enter into a transaction jointly, that said transaction shall be considered exclusive to this Joint Venture. Any such transaction will be confirmed in writing by the Parties as a Transaction Amendment. 

14. Arbitration

In the event of any dispute arising in and out of this Agreement between the Parties, it shall be resolved by Arbitration. There shall be [Number of Arbitrators] Arbitrators which shall be appointed by [Party Name]. The venue of Arbitration shall be [Venue/Location of Arbitration] and the seat shall be [State]. The Arbitrators' decision shall be final and will be binding on both the Parties. 

15. Miscellaneous

Severability: In the event, any provision of this Agreement is deemed to be invalid or unenforceable, in whole or part, that part shall be severed from the remainder of this Agreement, and all other provisions shall remain in full force and effect as valid and enforceable.
Governing Law: This Agreement shall be governed by and construed in accordance with the laws of the [State] without regard to conflict of law principles.
Notice: Any notice that is required by this Agreement shall be in writing and shall be given to the appropriate party by personal delivery or certified mail, postage prepaid, or any such delivery service provided.
Force Majeure: Neither of the Parties shall be liable for any failure in performance of any obligation under this Agreement due to causes beyond that Partner's reasonable control (including and not limited to any pandemic, fire, strike, act, or order of public authority and other acts of God) during the pendency of such event.
Entirety: This Profit-Sharing Agreement represents the full understanding of the Parties and shall supersede all previous oral or written agreements regarding the subject matter herein.
Modification: No modification of this [Document Type] shall be made unless in writing, signed by both Parties.

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Acceptance and Signature

IN WITNESS WHEREOF, Each of the Parties has executed, accepted, and agreed to this Profit Sharing Agreement, by their respective duly authorized officers, as on the day and year set forth below:

[Company 1 Name]

[Company 2 Name]

Signature

Assign signer 1

Name

Assign signer 1

Date

Assign signer 1

Signature

Assign signer 2

Name

Assign signer 2

Date

Assign signer 2

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DISCLAIMER: Revvsales, Inc is not a law firm. The content provided herein is for general information purposes only, and does not constitute legal advice. Revvsales, Inc and its partners make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of any information mentioned hereunder. The use or reliance of any information contained herein is for your personal use and solely at your own risk. You agree to fully release and indemnify Revvsales, Inc from any liability associated with the use of this content. You are advised to obtain independent legal advice before taking or refraining from any action on the basis of the content provided here.

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What is a Profit Sharing Agreement?

A Profit Sharing Agreement is a document that outlines the terms and conditions of a profit-sharing arrangement. It describes the ratio in which the parties involved shall share the profits and the losses, mainly in percentages.

The entire agreement shall be governed by and construed in accordance with the laws of the state. Hence the parties must discuss all the details and come to a common ground before entering into a partnership.

When is a Profit Sharing Agreement used?

A Profit Sharing Agreement usually comes into the picture when two parties agree to work together with the same goal or for a time-based project. The two entities stay as they are and do not create a new business just for the project, in other words, they form an unincorporated joint venture. Herein, both the parties agree to bring in different capabilities and skills to the table. Accordingly, the distribution of profits earned will reflect how the two parties shared responsibility and risk. Once there is an understanding of the parties regarding the profit and loss sharing, it is mindful to keep it in writing. This will keep all confusion and disputes at bay, resulting in a successful partnership.

In some cases, a Profit Sharing Agreement is also used in employment scenarios wherein the employees shall receive a partner treatment and provide them a sense of ownership. Based on the contract, an employee shall be entitled to a portion of the company’s profits although with some limitations as to how they can withdraw the funds.

What does a Profit Sharing Agreement include?

A Profit Sharing Agreement is a legal document that will usually contain the following elements:

Purpose: In this section, you must mention the purpose of this document, which is to clearly note down the terms and conditions agreed upon by both parties involved in the agreement.
Term: This section will talk about the time duration of the agreement’s validity. You can also mention the action that must take place at the end of the term, either renewal or termination.
Responsibilities: In this clause, you must clearly write the duties and responsibilities that are applicable to both partners involved in the agreement. You can also mention how this agreement shall treat the intellectual property of both parties.
Profit-Sharing: This is a crucial part of the agreement. Here, the investment and profit share ratio (in percentage) of each party, along with how it is calculated shall be mentioned. You can also mention the timeframe within which you would distribute the payments.
Liability: This clause will talk about the details regarding the damages that one party will be required to pay to the other according to the terms and conditions of the agreement.
Independent Contractor: In this clause, you can clearly mention that either party is not looking to build an employee-employer relationship and both parties will observe their governing law.
Confidentiality: This clause must set forth certain guidelines stating whether either partner can disclose partnership details or not; even after the agreement is terminated.
Termination: Another crucial part of the agreement is the Termination clause. It talks about when the agreement can be terminated, who can terminate it, and the consequences of the termination.
Arbitration: In this clause, you shall mention that if there are any disputes regarding the agreement, they would be resolved by arbitration. You can also specify which representative would appoint the arbitrators.
Miscellaneous: In this final clause, you can talk about the minute details like governing law, modification rules, notice duration, and severability of the agreement.

Use Revv’s Profit Sharing Agreement Template to amplify your creation process

A Profit Sharing Agreement is an exhaustive document containing ‘N’ number of clauses that must be written carefully with the help of a subject matter expert. This can easily delay your process by weeks and reduce your overall performance. But not with Revv!

Revv provides legally-vetted, carefully-designed, and customizable templates that will give you a kickstart and help you create agreements in a couple of days.

Here is a list of Revv’s advanced features handpicked for profit sharing agreement representatives:

Rich Editor

You can customize your profit sharing agreement according to your interests with Revv’s user-friendly and Rich Editor. With an easy drag and drop action, you can add different blocks like text, tables, eSignature tags, etc. You can also link Google Sheets and import data right within the agreement.

Form Fields

By transforming the details in your agreement into fillable placeholders called Form Fields, you can eliminate cumbersome tasks. With this, you only need to fill out each individual form field once, and the following instances of that field in the agreement will be filled out for you. Also, use Data Studio, a great data mapping tool to combine and bring in data from external apps.

Approval Workflows

Since a Profit Sharing Agreement has numerous clauses, you can get it double-checked by sending the agreement for internal approvals. When a clause has an approval workflow attached to it, any modifications to the clause will immediately initiate the workflow and send the agreement to the approvers.

eSignatures

Use Revv’s secure, legally valid, and fast eSignature facility to place your sign and close the agreement. It complies with the local and global eSignature laws including ESIGN Act, UETA, and eIDAS Regulation. Revv also generates an Evidence Summary, a legally admissible audit trail that records all the actions taken during the signing process.

Notifications

You can keep a track of your agreement’s status using Revv’s automated email notifications. Revv automatically creates and sends emails to both the sender and the recipient whenever you send an agreement for review, acceptance, or eSignatures.

Wait no more! Sign up with Revv and use this template to create a top-class, error-free Profit Sharing Agreement in no time.

Frequently asked questions

How do you write a profit sharing agreement?

A Profit Sharing Agreement is a legal document that contains the following elements - Purpose, Term, Responsibilities, Profit-Sharing, Liability, Independent Contractor, Confidentiality, Termination, Arbitration, and Miscellaneous.

What is a profit sharing clause?

A profit sharing clause is a section in the profit sharing agreement that describes the ratio (in percentage) in which both partners shall share the company’s profits and losses.

What is a profit agreement?

A profit agreement is a contract that comes into play between two companies that decide to operate jointly with the same objective. The agreement contains many clauses, one of which describes the ratio in which both parties shall share in the company’s overall earnings.

What if there is no profit sharing agreement?

If there is no profit sharing agreement written, then there are chances of a dispute between the parties involved in the partnership. This might lead to arbitration and finally, termination of the partnership.