If you want to grow your business, there are different ways you can choose to expand. You may want to further your brand’s reach and reputation to new regions, by allowing others to use your identifying symbols and business processes. Alternatively, you may need more hands on deck or workers with specific skills, so that you can take on more jobs. These strategies are used for quite different purposes and will have separate legal implications that you need to consider. Therefore, this article will look at the differences between licence agreements and contractor agreements.

What is a Licence Agreement?

licence agreement is an arrangement where you give another person or company the right to use your business’ identifying symbols and processes. You may wish to grant others a license to use your business’:

  • brand; 
  • logo; 
  • trademark;
  • copyright; and 
  • know-how of your business’ processes and procedures. 

In exchange, you may want to charge a fee for extending the right to use your branding and business processes. Or, perhaps payment is not important for you as you simply want to expand your brand to new regions.

It is a good idea to restrict the license recipient so that they can only operate in a particular region or territory, to avoid them encroaching on your market or to allow you to further license the business to people in different regions. You should also maintain a certain level of control over how they operate under your license, so that you can prevent them from adversely affecting your business or brand.

For example, an entertainment company might license out its logo, movie titles and characters to create merchandise. 

It is important to note that franchising your business is different from licensing. You want to ensure that your licence arrangement does not establish a franchise, as strict laws govern this business structure.

What is a Contractor Agreement?

Engaging a contractor involves a formal arrangement between you and an independent contractor who carries out certain work for your business. Contractors are different to employees, who have more entitlements and generally demand greater oversight. Often businesses engage contractors to work on specific projects when: 

  • more manpower is required;
  • specialised skills are needed; or
  • the work is ad hoc, even if it is on an ongoing basis.

The contractor provides you with an invoice and you pay them at the end of each fortnight or month for the work they have carried out.

For example, a business may engage a contractor to carry out its marketing or IT activities.

Key Differences Between Licence Agreements and Contractor Agreements

You should consider the purpose and benefits of licence agreements and contractor agreements before deciding which approach is best for your business.

Key Feature

Licence Agreement

Contractor Agreement

Payment

You can charge a fee in exchange for a license to use your brand and processes.

The contractor is paid by invoice at the end of each fortnight or month for the work they carried out. You may also be required to pay the contractor superannuation.

Involvement

You would provide the licensee with the branding, processes, software and equipment required for them to operate a business similar to yours.

Often the contractor would use their own tools or equipment to carry out the work.

Level of Control

You would have a certain level of control over your licensed brand, to make sure that their use of the brand does not adversely impact your business.

Although you do not have as much control over the contractor, you can include a restraint of trade clause in their contract to prevent them from competing with your business.

When Is It Advantageous To Use a Licence Agreement or Contractor Agreement?

Deciding between licence agreements and contractor agreements will depend on what your main goal for expansion is.

If you want to expand your brand and broaden your business’ reach to other areas of Australia, a licence agreement may be most suitable. You can allocate licensees a certain territory to operate in and allow them to build your brand independently. You would also have certain rights about how the person can represent your business. 

If you are looking for a bigger workforce to assist with more projects and jobs, a contractor agreement may be more appropriate. This is especially if the aim isn’t to further your brand name. When you engage a contractor, you can still ensure that they carry out tasks in a certain manner and appropriately represent your business.

Key Takeaways

Whether you choose to license your brand and business to someone or engage contractors depends on: 

  • how you want to expand or grow your business; and
  • the amount of control you want. 

If you want to expand your brand’s reach and have a bit more control over your business’ image, then licensing may be more appropriate. However, if you are looking for more people to assist with carrying out work so you can take on more jobs and clients, engaging a contractor may be more suitable. If you are looking for assistance drafting a licence or contractor agreement, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.
Rowan ONeill

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