Hello.
I have authored a piece of software for a niche industry. It is a business not a hobby (intent to make a profit, run in a regular way, all the hallmarks of a business) but would be considered a micro business / side hustle given the small addressable market.
in order to access the market I wish to sell to, I have engaged the services of another sole trader who works for this industry. Our agreement is that I would pay her 50% of all sales (top line revenue) in exchange for access to the market, promotional activities, onboarding etc. in this way she is incentivised to help the product become successful but I am not out of pocket if it doesn’t.
We do not wish this to be a partnership arrangement. I retain a of the intellectual property, all payments are made through my merchant facility paid into my sole trader bank account which she has no access to. She is not responsible for product design decisions or business direction.
what is the correct way to handle this? Have her raise a quarterly invoice for her share of the revenue?
how do I report this on my tax return?
(Choice to use sole trader instead of a company structure is a pragmatic one. Not sure that the idea will even work - so the cost of registration and compliance and complication of accounting doesn’t warrant the creation of a company)
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