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Free Management Services Agreement Template

Protect your business and outline the responsibilities when working with an outside management firm. A management services agreement helps define work terms, responsibilities, payment, and reporting expectations.
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How-to guides, articles, and any other content appearing on this page are for informational purposes only, do not constitute legal advice, and are no substitute for the advice of an attorney.

Management services agreement: How-to guide

Hiring an outside manager offers several advantages compared to hiring an internal employee, such as keeping costs down and saving time on recruiting and training. If these factors make this option a good fit for your business needs, utilize an outside management firm to provide management services and keep your business organized.

There are risks to businesses using outside managers, the most dangerous of which is that those individuals will be reclassified as employees. If this happens, the company using the managers must reimburse the IRS or state tax authority for delinquent employment taxes, interest, and penalties. Although a business cannot insulate itself absolutely from reclassifications or contract audits, written agreements can offer a certain amount of protection from such charges.

A suitable agreement is a better starting point to answer questions about work parameters, responsibilities, payment terms, business operations, and services provided. You can even specify what and how often the manager offers reports on the business and more with a management services agreement.

Once the parties agree on contract terms and have signed the attached form, each party can focus on its area of expertise—the company on the development of its business and the manager on the company's day-to-day management.

Factors to consider while drafting a management services agreement

Examine the contents of the agreement

The agreement protects the parties’ rights during the contract term. The parties must describe the services provided by the manager in a separate document and attach it to this agreement. This document must contain:

  • The goals of this arrangement
  • Any agreed-on terms
  • Description of the manager’s tasks, goals, milestones, and any specific results expected
  • Clarity on the terms and conditions of the agreement

Review the agreement

Allow both parties enough time to review the agreement to avoid any misunderstandings. Review the completed agreement carefully to ensure all relevant deal points are included. Don't assume any expectations or terms are agreed upon if they are not explicitly stated in the document.

Sign the agreement

Once the agreement is drafted and ready, sign two copies of it, one for the company and the other for the manager. Keep a copy of the signed agreement for your reference. At the end of its term, both parties can revisit its provisions and consider whether to renew.

A written agreement is the first step in establishing an individual’s independent contractor status. Once signed, both parties must follow its terms exactly and perform similar services to ensure that status is maintained.

Notarize the agreement

Depending on the nature of its terms, you may decide to have your agreement witnessed or notarized. This will limit later challenges to the validity of a party’s signature.

If your agreement is complicated, contact an attorney with legal experience to help draft a document that meets your needs.

Important sections in a management service agreement

The following instructions will help you understand the terms of your agreement. Please review the entire document before starting your step-by-step process.

Introduction

This section identifies the document as a management services agreement. Add the effective date when the agreement will be signed, identify the parties involved, and what type of organization they are. The hiring party is called the “company,” and the service provider is called the “manager.” They are collectively referred to as “parties.”

Recitals

The “whereas” clauses, referred to as recitals, define the world of the agreement and offer key background information about the parties. In this agreement, the recitals include a simple statement of one party’s intent to enter into a management services arrangement with the other party.

Appointment/acceptance

Here, the parties acknowledge that one party will be the manager of the other party’s (company’s) organization. The details of the additional services provided by the manager must be attached to the agreement.

Responsibilities

This section will list each party’s responsibilities under the agreement. Essentially, the manager agrees to perform the agreed-on services with adequate attention and care, and the company agrees to assist in this performance by providing necessary information and guidance.

If need be, add additional obligations (e.g., on the manager’s request, the company will provide regular feedback about the services being provided) and information about minimum hours of service that the manager will provide to the company.

Nature of relationship

This section explains that the manager is not an employee or partner of the company. This distinction is important for legal reasons, including insurance coverage requirements, liability, and taxes. The agreement emphasizes this divide, but both parties should maintain the line between independent contractors and employees in performing their duties. Review your state laws governing independent contractors to ensure the agreement follows local restrictions.

Term

This section allows you to:

  • Specify how long you want the first term of the agreement to last. By calling it the “initial term,” you are not obligating yourself to any additional terms—it may be the only one. Enter the number of years you want the initial term to last.
  • Enter the number of days advance notice the parties must give to end the agreement.

Insurance coverage

This section mentions that both parties must obtain or maintain all applicable insurance coverage. Enter the minimum amount that this coverage should be. This will vary depending on the size of your business and the extent of the services offered.

Confidential information

This section defines confidential information for purposes of the agreement and explains how the manager will treat that information, e.g.,

  • The manager can use the information only for purposes intended by the agreement (e.g., if the information was disclosed to help the manager complete its services, the information can be used only for that purpose)
  • The manager must treat the information as intellectual property and can discuss the information only with specific individuals within the company.

Representations and warranties

This clause details the parties’ promises under the agreement. Each party agrees to enter into the arrangement based on the conditions in this section (e.g., each can enter the agreement and satisfy its terms).

Compensation

This section sets up the rules w.r.t. payments and its terms, like,

  • A flat fee will be paid to the manager in exchange for the performance of the services under the agreement. The fee structure is initially stated as the total yearly amount, but this fee can be paid in installments pursuant to the parties’ agreement. Enter the frequency with which you want payments to be forwarded to the manager’s bank account (e.g., weekly fee, monthly fee, etc).
  • The circumstances under which no payments will be made.
  • The payments outlined are the manager’s only compensation for its services under the agreement.
  • The manager will pay for their internal expenses. This is another reflection that the company and the manager function as separate entities (i.e., not as employer and employee). However, expenses that the manager incurs specifically in performing services for the company will be reimbursed if sufficient evidence of those expenses is provided to the company.
  • The manager is responsible for paying their taxes on the money they receive (i.e., it is not receiving a “salary” as an employee of the company, and the company will not withhold those amounts on its behalf as a standard corporate practice).

Reporting

This provision mentions that the manager provides periodic reports on their services. You can designate a contact person at the company to receive these reports, indicate how frequently they should be provided, and specify the type of information to be supplied.

Work for hire

This section grants ownership of all work performed by the manager to the company under this agreement, including completed products and materials produced during creation.

No conflict of interest; other activities

This section confirms that the manager promises not to work with any other company or product that competes with the current company. However, the manager can work with other companies if it doesn't harm the current company or its interests.

Termination

This section explains that certain actions or events, including written notice or material breach, will cause the agreement to end out of time (i.e. before the services are completed or the end of the term, if any). Write in the amount of notice a party must give of its intent to terminate or to notify the other of a breach.

Return of property

Even though it may seem obvious that the manager should return any property after the agreement ends, this paragraph clearly states that. You need to specify the time period within which the manager has to return such property after the agreement is over.

Indemnification

This provision allocates responsibilities between the parties if problems arise in the future and protects each party from the consequences of the other’s negligent or intentional conduct.

Use of trademarks

This rule mentions that the manager cannot misuse the company's trademarks or get a trademark that looks like the company's. For instance, if someone is working for ABC, they can't apply for a trademark on a product with the name ABC, like Jane's ABC Products. Also, this section states that the manager cannot use the company's trademarks once the agreement ends.

No publicity

This section states that the manager can’t make significant public statements on the company’s behalf without their specific permission.

Amendments

This clause indicates that any changes to the document are ineffective unless they are made in writing and signed by both parties.

Assignment

This section explains that each party must obtain the other’s written permission before assigning its obligations and interests.

Successors and assigns

This clause says that the rights and duties of the parties will be transferred to their heirs or, in the case of companies, to the successor organizations or organizations that have been allowed to take the rights and duties.

Force majeure

This provision releases a party from its obligations if its performance is made impossible by an event beyond its control (e.g., flood, earthquake, etc.). This release is effective only if circumstances prevent that party from completing its tasks.

No implied waiver

This section explains that if either party allows the other to ignore or break an obligation under the agreement, it does not mean that the party waives any future rights to require the other to fulfill those (or any other) obligations.

Notice

This part provides a list of addresses where all the official or legal communication should be delivered. Please provide the mailing address for both the company and the manager.

Governing law

This provision allows the parties to choose the state laws that will be used to interpret the document.

Counterparts; electronic signatures

This clause states that if the parties sign the agreement in different locations or use electronic devices to transmit signatures, all the separate pieces will be considered part of the agreement. This provision ensures that business can be transacted efficiently without sacrificing the agreement's validity.

Severability

This section protects the terms of the agreement as a whole, even if one part is later invalidated. For example, if a state law is passed prohibiting choice-of-law clauses, it will not undo the entire document. Instead, only the section dealing with the choice of law would be invalidated, leaving the remainder of the agreement enforceable.

Headings

This part explains that the headings at the start of each section are meant to structure the document and should not be considered as operational parts of the note.

Frequently asked questions

What is management services agreement?

A management services agreement (also known as a master service agreement) is a legal document that facilitates the business relationship between two parties. It outlines the duties of the parties when one organization hires another to manage a particular business or service.

What is the purpose of the management agreement?

From an accounting perspective, hiring outside managers is cheaper than employing a full-time individual. In addition to the apparent expenses of salaries, bonuses, and other compensation, employees can subtly cost a company, requiring further investments in benefits, payroll taxes, insurance premiums, office space, and equipment. Such additional costs aren’t necessary for external managers. Companies can use these individuals for specific tasks according to business needs. They can avoid the legal minefields of hiring and firing staff according to the ebb and flow of the market. Large corporations choose experts for providing services when needed and can avoid the cost and hassle of providing additional education or training to current employees.

What is the essential information needed to draft a management services agreement?

Here's the information you'll need to have handy to complete management services agreements:

  • Who it's coming from: Determine if a business or individual is sending the document and have the name and contact information ready
  • Who it's going to: Know who this document is going to and have the individual or business name and contact information ready. If it's a business, make sure you know the business type (LLC, corporation, etc.)
  • Which state will govern it: Specify the state so it's clear what state laws apply to the document
  • Subject matter: Have a summary of the general duties and responsibilities of the manager ready
  • Time period: Be clear about how long you want this agreement's initial term to be and whether or not it will renew

Related categories

ConsultingCorporate and CommercialServices

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