Profit participation is a very complex topic that is the subject of a great many accounting disputes, legal claims, and general ill-will between companies and the people to whom they’re supposed to be paying participations.
This post is an attempt to give as simple a picture as possible. Even so, this is your fair warning that this is going to be a very long post, and I will be generalizing or simplifying a lot of really complex concepts for the sake of providing a clearer, broader overview.
Also, please keep my disclaimer in mind. I am by no means an undisputed authority on this topic and in trying to distill a complex process down, there will likely be some details that you’ll want to consult an attorney and/or accountant about before diving into profit participation on your own deals.
For everyone else, I hope this overview helps to demystify this complicated concept a bit.
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