Royalty splits for a foundry with several designers.

How shares are usually set

Most labels set shares per family. The family’s designers agree a percentage each, and every sale of any style in it is divided the same way. That’s the simplest rule to record and to explain, and it fits the usual case where the people who drew a family worked on all of it.

Shares per style suit a family where the work was divided clearly: one designer drew the romans, another the italics, a third added a condensed width two years later. Each style then carries its own split. The cost shows up in bundles. A family licence with roman and italic styles at one price has no natural split, so the contract needs a rule for it, such as dividing the bundle price across its styles in proportion to their single-style prices.

Shares by contribution cover people who didn’t draw the letters: a designer who did the spacing and kerning, an engineer who built the variable font, a designer who extended the character set to Greek and Cyrillic. They usually get a smaller share of the whole family, sometimes for a fixed number of years.

The designers’ shares rarely add up to 100%. What’s left is the label’s: it pays for the shop, the marketing, the specimens, support and the time spent on licensing questions. Write down both numbers, so nobody has to work out the label’s part by subtraction.

A worked example with three designers

A family has three designers. A drew the romans and has 25% of every sale. B drew the italics and has 15%. C did the spacing and production and has 10%. The label keeps 50%. These are shares of the family as a whole, so the italic designer earns on a sale of the romans too. That was the agreement, and it’s written in all three contracts.

On 14 March a buyer licenses the full family for desktop use. The list price is €500, a 10% discount code takes it to €450, and VAT is charged on top. The VAT belongs to the tax office, so the shares are worked out from €450. On 2 April the buyer finds they licensed more users than they need, and the label refunds €150, a third of the net.

The refund goes on the April statement as a negative line against the same order. It doesn’t rewrite March. If A was already paid for March, the April statement shows the €37.50 coming off whatever A earns in April. If April is a quiet month, the balance can go below zero, and the contract should say whether that carries forward or is written off.

Real numbers don’t always divide into whole cents. Three equal shares of a €100 sale are €33.33 each, with a cent left over. Pick a rule (the cent goes to the largest share, or to the label) and apply it the same way every time, so the statements always add up to the order.

What to record on each sale

Record the share that applied at the time of the sale. Contracts change: a designer’s share goes up after the family earns back its costs, a new designer joins for an extension. If statements are worked out from today’s shares, every earlier statement changes too. Keep each set of shares with the date it starts, and write the shares onto the sale itself.

For each sale and each designer, the useful fields are:

• the order number, date of payment and the item: family, style or bundle, and the licence
• the currency, and the amount the share is taken from, after discounts and before tax
• the share as a percentage, and the amount it gives
• whether the share was recorded at the time of sale or filled in later, for orders made before the shares were set

Discounts reduce the base for everyone. A code that takes 20% off a family takes 20% off every designer’s share of it. A discount on the whole cart is divided across its lines in proportion to their prices, so a designer whose family was in the cart beside another isn’t charged for the other family’s discount.

Refunds and disputes reverse shares. A full refund reverses all of them. A partial refund is harder, because a card payment provider usually reports an amount refunded and not which line it was for. Reversing the same fraction of every line is the fair default. A chargeback should reverse the shares when it opens, since the money has left the account, and restore them if the label wins it.

Bundles across families need their own rule. A collection of two families by different design teams at one price has to be divided between the families first, usually in proportion to the families’ own prices, and then between each family’s designers. Record that division on the sale.

Free licences, trial downloads and test orders earn nothing. Say so in the contract, so nobody asks about the 300 trial downloads in the analytics.

Statement periods and what a statement shows

Monthly or quarterly statements are both common. Monthly suits a label with steady sales and designers who rely on the income. Quarterly means fewer transfers and fewer fees when sales are small. Either way, count a sale in the period it was paid, and a refund or dispute in the period it happened.

A statement for one designer should list every sale, refund, dispute and reinstatement in the period, each with its order number, item, licence, the amount the share was taken from, the share and the amount. Under that come totals for sales, refunds, disputes and the net, then any balance carried from the last period. A designer should be able to check any line against the order without asking.

Send it as a file the designer can open in a spreadsheet, alongside a readable version. Designers keep their own records for tax, and a PDF of totals can’t be checked.

Currencies, fees and tax

A foundry that sells in euros and dollars earns in both. The question is when, and at what rate, the dollars become euros. Converting each sale at the day’s rate means a statement in one currency, but the rate on the statement isn’t the rate the bank used. Keeping a statement per currency and converting only when the label pays is simpler to check. Agree which one in the contract, and who carries the difference.

Payment fees are the other recurring question. Card fees take a few percent of each sale, and a lost dispute often adds a flat fee on top. Some labels take shares from the amount before fees and absorb them as a cost of running the shop. Others take shares from the amount received. The second makes every statement depend on the payment provider’s pricing, and on fees that can arrive after the period closes.

Sales tax and VAT should never be in the base. Neither should a marketplace’s or a merchant of record’s commission, when the label sells through one. If a share is taken from what the label actually receives, the contract should name each deduction.

The contract with each designer

This isn’t legal advice. Have a lawyer read your own text. These are the points that cause arguments later when a designer’s contract leaves them out:

• what the share is taken from: list price, the price after discounts, or the amount received after fees
• which products it covers, including custom versions, commissions and extensions made by other designers
• how bundles and collections are divided
• how refunds, chargebacks and negative balances are handled
• the statement period, the currency, how soon after a period ends the designer is paid, and any minimum amount
• what happens to the share if the designer leaves the label, or the family is withdrawn
• the designer’s right to see the records behind a statement

Paying designers

Working out what each designer is owed and moving the money are different tasks. Some services pay designers directly. Others only report, and the label pays from its own account. Paying directly means the service handles withholding tax and cross-border forms. Reporting only means the label needs its own record of what it paid.

Keep that record of what was paid, and when, beside the statements, so a question about a statement can be answered from one place.

Where Typetin fits

Typetin sets shares per typeface as a percentage to two decimal places, and writes each designer’s share onto the order lines, after any discount and before tax. Refunds and disputes reverse shares in the ways described above, and statements are per designer and per currency, on screen or as a CSV file. Typetin produces royalty statements and moves no money to designers. Royalty statements start on the Foundry plan. How royalties work in Typetin.