How
do I set down payment and royalty for a license?
A:
When
you sell a license, you sell the right to produce and market your products.
Your down payment and royalty is a profit sharing. First find out what
the product will sell for and the local manufacturing cost. Then calculate
the gross margin the licensee will have. Then you decide what is reasonable
as your part. That will stipulate the down payment and the percentage or
$ value of the royalty.
Note
remember that in most countries you can not just bring home the royalty.
There is normally a withholding tax to the local authorities. With the
right tax treaties between the countries you can deduct that tax at home.
