Both royalties and commissions are the compensations which someone gives to other person in the form of money. These are considered similar to each other but vary in their purposes.

Royalties               

A Royalty is the fee paid to the owner by the company or an organization for selling his products. A company pays some percentage of money to the owner when it uses the asset of a person.

Royalties are the payment for the rights to use the intellectual property of the owner; copyrights, trademarks, trade secrets, patents etc. It is based on the agreement between the owner (seller) and the company (buyer). A Royalty as an amount being paid for long time to the owner usually every month, every year or when the item got sold. It is paid for commercial use of product having copyrights.

 Origin

The word Royalty has an origin in the Middle Ages when the Royals (kings) owned the land of minerals, when anybody wanted that mineral from the land they had to pay the royalty (payment).

Who use Royalty?

Royalty involves two parties.

  • The owner who has the intellectual property and want to sale it (the owner/seller).
  • The company which makes agreement to use that property (the buyer/licensee).

Kinds of Royalty

Book Royalty: It is the fee paid to the authors by the publishers.

Franchise Royalty: It is the fee paid to the main company by the franchise holder (monthly or yearly).

Performance Royalty: It is the fee paid to the owner who created a piece of music for its copyright use.

Mineral Royalty: It is the fee paid to the mineral owners by the person who has the right of using the mineral.

Art Royalty/ Stock photography: It is the fee paid for the use of an image.

Commissions

A commission is also a fee paid as compensation to the

salesperson for the items being sold. It is the payment

that is payed to the salesperson, property agents or real estate agents as a commission they earn to sale a property. They get paid a commission that depends on the profit on sold item.

Commission is known as a retail business in today’s world. It could be a fixed fee or a percentage of the total sale price.

Example: Building commission: It is a process in which a constructor builds the building and sales with heavy commission.

Kinds of Commission

Gross Profit: It is type of profit after deduction of the actual

 cost of making and selling products.

Revenue Commission: It is the income a company earns for overall sale of the product.

Graduated Commission: A company sets tiers and an employee will be paid who shows great performance by achieving the level of sales.

Conclusion

The main difference between both is the duration of earning. A Royalty is form of earning on continual basis while a Commission is a form of earning only once. So who will say no to continual earning? Be wise and earn!