Alex is Sprintlaw's co-founder and a legal technology leader. He holds law and media degrees from the University of Sydney and has been recognized by Australasian Lawyer, Lawyers Weekly and the Sydney Young Entrepreneur Awards for his work building Sprintlaw and improving access to business legal support.
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Affiliate marketing can be a cost-effective and scalable way for US small businesses to reach new customers. But before you launch an affiliate program or partner with influencers, it is critical to have a clear and legally sound affiliate agreement. This checklist will help you understand what to include in your affiliate contracts, how to manage compliance risks, and what federal and state rules you need to consider.
What Is an Affiliate Agreement?
An affiliate agreement is a contract between your business (the merchant or advertiser) and a third party (the affiliate) who will promote your products or services in exchange for a commission or other incentive. The agreement sets out the rules, expectations, and legal obligations for both sides. A well-drafted affiliate agreement can help prevent disputes, clarify payment terms, and ensure your marketing activities comply with US law.
Affiliate agreements are common in e-commerce, SaaS, online education, and many other industries. They are especially important if you work with influencers, bloggers, or content creators who promote your brand to their audience. Without a written agreement, you risk confusion over commissions, brand misuse, or even legal penalties if affiliates do not follow advertising rules.
Example: An online retailer partners with a popular fashion blogger to promote its clothing line. The affiliate agreement should specify what products the blogger can promote, how much commission they will earn, and what disclosures are required in their posts.
Why Is an Affiliate Agreement Checklist Important?
Affiliate marketing is regulated by the Federal Trade Commission (FTC) and, in some cases, by state advertising and contest laws. If your affiliate program is not set up correctly, your business could face fines, reputational damage, or even lawsuits. A thorough affiliate agreement checklist helps you:
- Identify key contract terms and legal requirements
- Reduce the risk of misunderstandings or disputes with affiliates
- Stay compliant with FTC endorsement and advertising rules
- Protect your intellectual property and brand reputation
- Set clear expectations for commissions, payments, and reporting
- Adapt to state-specific rules or industry standards
Following a checklist also makes it easier to update your agreements as laws and business needs change.
Common Mistake: Relying on a generic template without customizing it for your business or industry. This can leave out important terms or fail to address unique risks, such as state-specific advertising laws or special rules for regulated products.
Affiliate Agreement Checklist: Key Clauses and Requirements
Below is a practical checklist of what to include in your affiliate agreement. Your business model, industry, and state may require additional terms. Where possible, we include examples and state-law caveats.
- Example: "Affiliate" means any person or entity approved by [Your Company Name] to participate in the affiliate program and promote the company's products in exchange for commissions.Parties and Definitions
- Clearly identify your business and the affiliate by legal name and address.
- Define key terms like "affiliate," "commission," "qualified sale," and "promotional materials."
- Example: The affiliate may only use approved images and logos provided by the company. Promotions on adult or gambling sites are prohibited.State Caveat: Some states, like New York and California, have stricter rules about email marketing and privacy. If your affiliates use email, require compliance with the CAN-SPAM Act and local privacy laws.Scope of Promotion
- Describe what products, services, or brands the affiliate can promote.
- Set limits on how and where promotions can occur (e.g., websites, social media, email, paid ads).
- Require affiliates to comply with your brand guidelines and marketing policies.
- Example: The affiliate will receive a 10% commission on all qualified sales tracked through their unique referral link. Commissions are paid monthly via ACH, with a $50 minimum payout.Common Mistake: Failing to define "qualified sale" can lead to disputes if a customer cancels or returns an order after the affiliate has been paid.State Caveat: In some states, such as Massachusetts, late payment of commissions can trigger additional penalties. Specify payment timelines clearly.Commission Structure and Payment Terms
- Specify how commissions are calculated (flat fee, percentage, tiered, etc.).
- Define what counts as a "qualified sale" or conversion (e.g., completed purchase, no refund within 30 days).
- Set payment schedules (monthly, quarterly, etc.) and minimum payout thresholds.
- Explain how returns, chargebacks, or cancellations affect commissions.
- Clarify tax reporting obligations (e.g., IRS Form 1099 for US-based affiliates).
- Example: The affiliate must not bid on the company's brand name in Google Ads or use unauthorized discount codes.Common Mistake: Not monitoring affiliate activity. The FTC expects businesses to supervise their affiliates and take action if rules are broken.Affiliate Obligations and Restrictions
- Require affiliates to comply with all applicable laws, including FTC endorsement guidelines.
- Prohibit misleading, deceptive, or illegal advertising practices.
- Ban certain marketing channels if needed (e.g., paid search on your brand terms, SMS, coupon sites).
- Set rules for use of intellectual property, trademarks, and promotional materials.
- Require proper disclosure of affiliate relationships in all promotions (see FTC guidance below).
- Example: Affiliates must include a disclosure such as "I may earn a commission for purchases made through this link" in every promotional post.State Caveat: Some states, like Florida and New York, have additional rules for influencer marketing and sweepstakes. If your affiliate program includes giveaways, check state requirements for registration or disclosures.Compliance With FTC and State Laws
- Reference the FTC Endorsement Guides and require affiliates to make clear, conspicuous disclosures of their relationship with your business.
- Address any state-specific requirements for advertising, contests, or sweepstakes if relevant.
- Include a right to audit affiliate activities for compliance.
- Example: The affiliate may not alter the company's logo or create their own marketing materials without written approval.Intellectual Property and Confidentiality
- Grant limited rights to use your trademarks, logos, and content for promotional purposes.
- Prohibit modification or misuse of your intellectual property.
- Include confidentiality provisions to protect sensitive business information.
- Example: Either party may terminate this agreement with 14 days' written notice. Upon termination, the affiliate must remove all promotional materials and will be paid commissions earned up to the termination date.Common Mistake: Not addressing what happens to pending commissions or affiliate links after the agreement ends.Term, Termination, and Consequences
- Set the duration of the agreement (fixed term or ongoing).
- Allow for termination by either party, with or without cause.
- Specify what happens to unpaid commissions and use of your IP after termination.
- Example: This agreement is governed by the laws of Delaware. Any disputes will be resolved by binding arbitration in [Your State].State Caveat: Some states, like California, limit the enforceability of certain dispute resolution clauses. Consult a qualified attorney if you have affiliates in multiple states.Dispute Resolution and Governing Law
- Choose the state law that governs the agreement.
- Include a process for handling disputes (mediation, arbitration, or court).
- Example: The affiliate may not assign this agreement or subcontract promotional activities without the company's written consent.Other Key Clauses
- Indemnification (who is responsible if a third party sues).
- Limitation of liability.
- Assignment and subcontracting rules.
- Entire agreement and amendment procedures.
For a deeper look at these terms, see our Affiliate Agreement resource.
FTC Endorsement and Advertising Rules for Affiliates
The Federal Trade Commission (FTC) sets federal standards for endorsements, testimonials, and affiliate marketing. If your affiliates promote your business online, you are responsible for making sure they follow these rules. Key requirements include:
- Disclosure: Affiliates must clearly and conspicuously disclose their relationship with your business in every post, video, or review that could influence a consumer. Acceptable disclosures include statements like "I earn commissions for purchases made through this link." Disclosures must be easy to notice and understand, not buried in footnotes or hidden behind links.
- Truthful Claims: Affiliates cannot make false, misleading, or unsubstantiated claims about your products or services. All advertising must be honest and evidence-based.
- Monitoring: The FTC expects businesses to monitor their affiliates for compliance. This can include providing written policies, training, and regular audits of affiliate content.
Example: If an influencer posts a video review of your product, they must include a spoken or written disclosure of their affiliate relationship in the video itself, not just in the description.
For more information, see the FTC's Disclosures 101 for Social Media Influencers and FTC Advertising and Marketing on the Internet.
State Caveat: Some states, such as California and New York, have additional advertising and privacy rules. For example, California's "Shine the Light" law may require additional disclosures if you share consumer data with affiliates. Always check local requirements if your affiliates are based in or target consumers in specific states.
Common Mistake: Assuming that only the affiliate is liable for non-compliance. The FTC can hold your business responsible if your affiliates fail to disclose their relationship or make misleading claims.
Managing Affiliate Program Risks
Affiliate programs can expose your business to legal, financial, and reputational risks. Here are practical steps to help manage these risks, with examples and checklists:
- Due Diligence: Screen affiliates before onboarding. Review their websites, social media, and marketing practices for red flags such as fake reviews or prohibited content.
- Written Agreements: Always use a written affiliate agreement that covers the checklist above. Avoid informal or handshake deals.
- Training and Guidelines: Provide affiliates with clear written policies, FTC disclosure templates, and brand guidelines. Offer examples of compliant disclosures.
- Ongoing Monitoring: Regularly review affiliate promotions for compliance. Set up alerts, use affiliate management software, or conduct random audits.
- Prompt Enforcement: If you find violations, act quickly. This may include issuing warnings, withholding commissions, or terminating the affiliate relationship.
- Recordkeeping: Keep records of affiliate agreements, communications, and compliance efforts. This can help if you face an FTC inquiry or legal dispute.
Example: A SaaS company uses software to monitor affiliate links and social media posts for required disclosures. If an affiliate fails to comply, the company sends a warning and withholds commissions until the issue is fixed.
Checklist for Managing Risks:
- Vet affiliates for reputation and compliance history
- Use a customized written agreement
- Provide clear disclosure language and marketing rules
- Monitor affiliate activity regularly
- Document all communications and compliance actions
- Respond quickly to violations
Common Mistake: Not keeping evidence of your compliance efforts. If the FTC investigates, you may need to show you trained, monitored, and enforced your affiliate rules.
FAQs
Do I need an affiliate agreement for every affiliate?
Yes, it is best practice to have a written affiliate agreement with every affiliate or influencer who promotes your business. This protects both parties and helps ensure compliance with FTC and state rules. Even if you use an affiliate network, review their standard terms and consider adding your own requirements if needed.
What happens if an affiliate does not follow FTC disclosure rules?
If an affiliate fails to properly disclose their relationship with your business, both the affiliate and your business could face FTC enforcement or consumer lawsuits. The FTC expects businesses to educate and monitor their affiliates. Non-compliance can lead to fines, orders to change marketing practices, and reputational harm.
Can I ban certain types of affiliate marketing?
Yes, your affiliate agreement can prohibit specific marketing channels or tactics, such as pay-per-click ads on your brand terms, unsolicited email, or coupon/deal sites. Be clear about what is allowed and what is not. This helps protect your brand and reduces legal risks.
Are affiliate commissions taxable?
Yes, commissions paid to US-based affiliates are generally considered taxable income. Your business may need to collect a Form W-9 from affiliates and issue a Form 1099-NEC if you pay $600 or more in a calendar year. State tax rules can also apply.
What if my affiliates are based in different states?
If your affiliates operate in multiple states, your agreement should specify which state's law governs the contract. However, affiliates must still comply with the advertising and privacy laws of the states where they do business or target consumers. For example, California and New York have stricter rules for influencer marketing and consumer privacy.
Key Takeaways
- An affiliate agreement is essential for any US small business running an affiliate or influencer program.
- Include key terms such as commission structure, FTC compliance, intellectual property, and termination rights.
- Follow FTC endorsement and advertising guidelines, and monitor affiliates for compliance.
- Use written agreements and clear policies to manage legal and reputational risks.
- State and industry rules may add extra requirements, especially for contests or sweepstakes.
- Common mistakes include using generic templates, failing to monitor affiliates, and not documenting compliance efforts.
For more on digital marketing contracts, see our Digital Marketing & Advertising and Contracts resources.
If you are setting up an affiliate program or need help reviewing your affiliate agreement checklist, contact our team at (888) 449-8437 or team@sprintlaw.com. Where legal services are required, they are delivered by licensed lawyers at trusted law firm partners through the Sprintlaw platform.
