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A Bad Rep?

They sell your products, but their contracts can sell you down the river.

This story appears in the December 2000 issue of Entrepreneur. Subscribe »

Whether they are employees or independent contractors, sales representatives can expand your market and boost the bottom line-or they can cost you a bundle in commission disputes and lost sales. You can avoid those problems with well-drafted sales representative agreements, says James B. Sherman, an attorney with the law firm Wessels & Pautsch PC in Min-neapolis. Sherman, who specializes in representing management in labor and employment cases, says he's amazed at how frequently companies fail to clearly define the terms of their relationships with sales reps at the outset and then run into problems later.

"A well-drafted rep agreement is critical," says Sherman, adding that companies in many states face severe penalties, including attorney's fees and punitive damages, should a sales rep prevail in a commission dispute. The key points any rep agreement should cover include:

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