Further, the Agreement will have a time limit, or "term". The average term is three years. Normally, there is an initial number of years and then "options" for additional years, with the manager generally having the option power. The artist can limit the term by requiring "performance standards" whereby, for example, if the artist does not obtain a recording agreement or does not make a certain amount of money in the initial period, then the manager cannot pick up an option for more years.
Moreover, the Agreement will set forth the manager's fee, which on average is fifteen to twenty percent "of gross earnings" (i.e., before deductions) from all aspects of the artist's career. Yet, the artist can exclude certain monies from the manager's commission. If the artist, for example, is already a successful songwriter or actor, the manager should not be able to commission those earnings. Further, there are other monies which only "pass through" the artist's hands and which the artist never really earns. These, too, should be excluded and consist of: recording costs, tour support, independent promotion money, producer fees, and live gigs where the "net" is minimal.
Finally, with respect to commissions, the Agreement should have what is known as a "sunset clause" on activities which occur after the termination of the Agreement. Although a manager normally wants to be paid perpetually on sales of records released during the term, the band can negotiate that the percentage is reduced over a span of a certain number of years until the manager is no longer entitled to any commission.
Although this is not an exhaustive list of the important points, an artist needs to at least have a grasp of these concepts before he or she signs on the dotted line.
Ben McLane Esq