What Are Royalty Checks?

Royalty checks can last a lifetime.

Royalty checks are payments to the creator or owner of a product based on the amount of a product's sales. They are often associated with creative professions, but royalty checks can come from a wide variety of industries.

Types

The two most common types of royalties come from the use of copyrights, trademarks and patents; and royalties from the extraction of oil, gas or minerals from a property.

Industries

Typically, the people who are eligible for royalty checks are inventors, writers, movie makers, music composers and musicians. Landowners can be paid royalties if their property is used to extract oil.

Frequency

There is no set standard for the frequency of royalty payments. Typically, they are either monthly or quarterly.

Amount

The amount of a royalty check is based on a percentage of the net or gross sales of a product. It is paid by a licensee to the licensor. Percentages vary greatly based on the industry.

Benefits

The advantage of royalty checks as opposed to other income is that they can last indefinitely as long as the underlying product is still being sold or producing value.

References

• Law.com: Definition of Royalty
• CompleteTax.com: Royalty Income