Is an e-signature valid?

Yes. Electronic signatures are legally valid in interstate commerce under the ESIGN Act (15 U.S.C. ch. 96, 2000) and under UETA where adopted; ensure intent, consent, attribution, and retention to meet the four-part e-signature validity test.

When is notarization required?

Notarization depends on state law and document type. Many commercial agreements do not require notarization, but real estate deeds, certain affidavits, or statutory forms often do. For notarization rules and remote online notarization availability consult the state notary office or NCSL guidance.

What happens if fields are wrong?

Incorrect or incomplete fields can invalidate parts of the agreement, trigger tax reporting errors, and lead to IRS penalties (see IRC §6721) or contract disputes. Correct errors promptly, re-execute with clear amendment language, and retain both versions for audit trails.

Can the agreement be revoked?

Yes, subject to the agreement terms and applicable law. Parties typically include termination or amendment sections specifying notice, effective date of revocation, and steps to unwind allocations. Mutual rescission requires documented consent and reallocation calculations where needed.

How long should records be kept?

Retain executed agreements for the term plus a post-termination period; federal standards require three years for tax records (IRC §6501(a)), and HIPAA-covered records require six years (45 CFR §164.530(j)). State rules may impose longer periods.

Does signNow support these requirements?

signNow supports legally binding eSignatures under ESIGN and UETA, offers HIPAA support with a BAA, maintains SOC 2 Type II and ISO 27001 certifications, supports 21 CFR Part 11 controls, provides detailed audit trails, and exports signed PDFs suitable for retention.

Electronic Signature
Templates
Miscellaneous
Business Averaging Agreement

Business Averaging Agreement

This template is fully customizable. Edit the text, fill out the fields, and send it for signature. Give it a try!

BUSINESS AVERAGING AGREEMENT

This Business Averaging Agreement (the "Agreement") is entered into as of by and between:

Party A:

Party A Business Address

Party B:

Party B Business Address

RECITALS

WHEREAS, Party A and Party B each operate businesses that engage in similar lines of commerce and desire to implement an averaging arrangement for specified business metrics to stabilize pricing, procurement, and reporting; and

WHEREAS, the parties wish to set forth the terms under which the parties will average specified metrics, allocate payments, and share the resulting obligations and benefits; and

WHEREAS, the parties intend that this Agreement constitute a binding contract defining each party’s rights and obligations with respect to the averaging arrangement.

SCOPE OF WORK

The parties agree to average the following business metrics and activities during each averaging period. The specific methods, measurement points, and reporting obligations are described below.

Metrics, Methodology, and Deliverables

PAYMENT TERMS

Payment obligations arising from the averaging calculations will be allocated and paid as set forth below.

Base Payment Amount (if applicable) Payment Schedule and Invoicing Late Payment

Any undisputed amount not paid within days of the due date shall accrue interest at per month, compounded monthly. In addition, the non-defaulting party may suspend performance following ten (10) days' written notice if the default remains uncured.

TERM AND TERMINATION

This Agreement shall commence on and shall continue in effect until unless earlier terminated in accordance with this Agreement.

Notice Period for Termination

Either party may terminate this Agreement for material breach if the breaching party fails to cure such breach within thirty (30) days after receipt of written notice describing the breach. Immediate termination is permitted where a breach is incapable of cure or involves theft, fraud, willful misconduct, or a party’s insolvency.

CONFIDENTIALITY

Each party (the "Receiving Party") shall hold in strict confidence and not disclose to any third party any Confidential Information of the other party (the "Disclosing Party") disclosed in connection with this Agreement. "Confidential Information" includes non-public business, financial, technical and operational information, formulas, methodologies, pricing, trade secrets, projections and customer data, whether disclosed in oral, written, electronic or other form.

The Receiving Party shall use Confidential Information solely to perform obligations under this Agreement and shall take reasonable measures to protect Confidential Information at least as stringent as those it uses for its own confidential materials. Confidential Information does not include information which (a) is or becomes publicly available without breach of this Agreement, (b) was known to the Receiving Party prior to disclosure, or (c) is independently developed by the Receiving Party without use of the Disclosing Party’s Confidential Information.

Upon termination or expiration of this Agreement, the Receiving Party shall promptly return or destroy Confidential Information in its possession and certify such return or destruction upon the Disclosing Party’s request.

NOTICES

All notices required or permitted under this Agreement shall be in writing and delivered to the addresses set forth below or to such other address as either party may designate in writing.

Notice Address for Party A Notice Address for Party B

GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the laws of the State of without regard to choice of law principles. The parties consent to the exclusive jurisdiction of the state and federal courts located in that State for any dispute arising out of or relating to this Agreement.

ENTIRE AGREEMENT

This Agreement, together with any written exhibits or schedules expressly incorporated herein, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, proposals, negotiations, and representations, whether written or oral. Any amendment or modification must be in writing and signed by authorized representatives of both parties.

MISCELLANEOUS PROVISIONS

If any provision of this Agreement is held to be invalid or unenforceable, that provision shall be severed and the remaining provisions shall remain in full force and effect. The headings in this Agreement are for convenience only and shall not affect interpretation. Neither party may assign its rights or delegate its obligations under this Agreement without the prior written consent of the other party, except to an affiliate or successor in interest by merger or sale of substantially all assets.

REPRESENTATIONS AND WARRANTIES

Each party represents and warrants that it has the power and authority to enter into this Agreement and perform its obligations hereunder, and that the execution and performance of this Agreement will not violate any other agreement to which it is a party.

Party A — Printed Name

Name:

By:

Date:

Party B — Printed Name

Name:

By:

Date:

What a Business Averaging Agreement Is

A Business Averaging Agreement is a formal contract used by companies to allocate and average certain business metrics, revenues, costs, or tax positions across defined accounting periods or related entities. It documents the agreed methodology for calculating averaged values, identifies the parties, sets the effective date and term, and records any formulas, adjustments, or allocation keys. The agreement helps reduce reporting variance, align tax positions, and create an auditable record for internal controls and external reviewers while clarifying responsibilities for future adjustments and dispute resolution.

Why the Agreement Matters for Accuracy and Compliance

A Business Averaging Agreement standardizes calculation methods, reduces ambiguity in reporting, and documents responsibilities. It supports accurate financial statements and tax filings, lowers the risk of audit disputes, and provides a clear contractual basis for adjustments between parties.

Who Typically Uses a Business Averaging Agreement

Typical users include internal finance teams, tax advisors, external accountants, and counterparties that agree to share or allocate business results.

Small and mid-sized businesses allocating revenues across subsidiaries during tax reporting.
Accounting departments documenting formulas used for multi-period averaging and reconciliations.
External auditors and tax counsel needing written methodology to support positions.

Parties completing the agreement should ensure authorized signers and clear technical exhibits to avoid later disputes or rework.

Primary Roles Involved

Owner/Principal

Often the contracting party or equity holder who authorizes averaging terms; must confirm company legal name, EIN, and full authority to bind the entity. Their signature verifies consent to allocation formulas and sets the effective date for tax and accounting purposes.

CFO/Controller

Responsible for drafting exhibits, maintaining calculation workpapers, and coordinating with tax counsel. They ensure formulas map to financial systems, verify historical data inputs, and approve internal controls for periodic recalculation or audit trails.

Essential Components of a Professional Agreement

A complete agreement contains defined scope, calculation methodology, exhibits, responsibilities, dispute resolution, and signature blocks to ensure enforceability and auditability.

Scope

Clearly describe which entities, periods, revenue streams, or cost pools are covered and any exclusions to prevent later interpretation disputes by auditors or courts during review.

Methodology

Set formulas, rounding rules, allocation keys, and sample computations; provide a worked example and reference spreadsheet included as exhibit to ensure reproducible results.

Exhibits

Attach schedules, spreadsheets, and data export files that show inputs and outputs; identify source systems and reconciliation steps for audit verification and sample journal entries.

Responsibilities

Allocate ongoing duties for data preparation, formula maintenance, periodic review, and dispute resolution; name primary contacts and backup designees for each task with timelines and escalation paths.

Signatures

Provide signature blocks for authorized representatives, include printed name and title, and record the date and capacity in which each signer executes the agreement, and attach corporate resolution if required.

Dispute Resolution

Specify governing law, venue, and whether arbitration or courts apply; include interim measures and the process for recalculation or corrective adjustments with notice periods and fee allocation.

Required Information and Short Data Checklist

Party Names: Full legal names required

EIN/Tax ID: Enter Employer Identification Number

Effective Date: Use MM/DD/YYYY format

Allocation Formula: Describe calculation and units

Exhibits: Attach schedules and workpapers

Signatures: Authorized signer and date

Step-by-Step: Completing the Agreement

Follow these steps to complete the agreement accurately, document formulas, and confirm signer authority before execution.

01

Prepare Data: Gather historical financials and allocation inputs.
02

Draft Exhibit: Define formulas, sample calculations, and rounding rules.
03

Review: Have tax counsel and internal control reviewer verify methodology.
04

Sign: Obtain authorized signatures and retain executed copies.

How to Configure an Online Signing Workflow

Configure your online workflow fields, routing order, and authentication settings to match internal approval and audit requirements.

Field	Configuration
Signer Order	Set role-based sequential signing; define alternates.
Authentication	Email link, SMS code, or KBA per document sensitivity.
Conditional Fields	Show fields only when criteria met to reduce errors.
Retention Settings	Enable audit trail retention and PDF export after signing.

Platform and File Requirements for eSubmission

Digital submission requires secure transport, compatible file formats, and signer authentication that meets legal standards.

File Types: PDF, DOCX, or fillable form
Integrations: Salesforce, NetSuite, Google Workspace
Authentication: Email, SMS, SSO options

Where to Send or File the Agreement

Typical submission flow: prepare the agreement, assign fields, send to signers, and store executed copies with audit records.

Upload: Place the final agreement document for signing.
Place Fields: Add signature, date, and calculation fields.
Set Routing: Define signer order and authentication method.
Archive: Export signed PDF with audit certificate.

Timelines, Deadlines, and Recordkeeping Windows

Key filing and recordkeeping deadlines for agreements and related tax reporting depend on document purpose and tax calendar.

Provide on Request:

W-9 information should be provided when requested by payer.

Tax Return Deadlines:

Ensure averaging entries reflect tax year and filing deadlines.

Retention After Execution:

Keep executed originals for the agreement term plus at least three years.

I-9 / Employment:

Retain employment records per federal I-9 rules where applicable.

Audit Response Window:

Respond to auditor inquiries promptly; delays risk penalties and adjustments.

Common Preparation Mistakes to Avoid

Using ambiguous allocation language that leaves rounding, timing, or excluded items undefined, which creates disputes during audits or financial reviews.
Failing to attach calculation workpapers or sample periods, making it difficult to validate averaged figures during reconciliation.
Not verifying signer authority or corporate resolutions, leading to questions about enforceability and possible re-execution.
Relying on handwritten or inconsistent templates without an audit trail, increasing risk of tampering or missing signature evidence.

Penalties and Risks from Incorrect or Missing Information

Contract Voidance: Unenforceable terms risk invalidation

Tax Adjustments: IRS may propose adjustments

Penalty Exposure: Penalties under IRC §6721 possible

Backup Withholding: Incorrect TIN can trigger 24% withholding

Audit Costs: Professional fees and remediation expenses

Reputational Risk: Contract disputes may harm business relationships

Examples: How Organizations Use Averaging Agreements

Real-world examples show how averaging agreements reduce disputes and document methodology for audits across industries.

Optica Ventures

Optica Ventures used a Business Averaging Agreement to formalize revenue allocations among portfolio companies, clarifying intercompany chargebacks and tax reporting.

Cut reconciliation time by 50%.
The agreement provided a repeatable, auditable method for allocations, which simplified quarterly close and eased auditor inquiries. Leadership reported fewer adjustments and clearer documentation across subsidiaries, improving internal controls and reducing external review time.

Martin Properties

Martin Properties adopted the agreement to average seasonal rental income across multiple properties, enabling consistent monthly recognition and lender reporting.

Improved lender reporting consistency and timing.
Site staff executed standardized exhibits electronically, which reduced paper handling and ensured all signed copies included calculation worksheets. During the next audit, the firm produced clear evidence of method and inputs, avoiding adjustments and questions from the auditor.

Baseline eSignature Pricing and Feature Comparison

Compare baseline eSignature plans and feature availability for signing and processing Business Averaging Agreements online.

	signNow	DocuSign	Adobe Sign	PandaDoc	HelloSign
Starting Price	$8/user/mo	$15/user/mo	$14/user/mo	$19/user/mo	$15/user/mo
Free Trial	7-day free trial	Varies	Varies	Varies	Varies
Bulk Send	Yes	Yes	Yes	Yes	No
Audit Trail	Yes	Yes	Yes	Yes	Yes
HIPAA Compliant	Yes	Yes	Yes	No	No
Envelope Cap	No cap	100 envelopes/user/year	Varies	Varies	Varies

Frequently Asked Questions About Business Averaging Agreements

Answers to common questions about completing, signing, and storing a Business Averaging Agreement in the United States.

Need help? Contact support

Is an e-signature valid?
Yes. Electronic signatures are legally valid in interstate commerce under the ESIGN Act (15 U.S.C. ch. 96, 2000) and under UETA where adopted; ensure intent, consent, attribution, and retention to meet the four-part e-signature validity test.
When is notarization required?
Notarization depends on state law and document type. Many commercial agreements do not require notarization, but real estate deeds, certain affidavits, or statutory forms often do. For notarization rules and remote online notarization availability consult the state notary office or NCSL guidance.
What happens if fields are wrong?
Incorrect or incomplete fields can invalidate parts of the agreement, trigger tax reporting errors, and lead to IRS penalties (see IRC §6721) or contract disputes. Correct errors promptly, re-execute with clear amendment language, and retain both versions for audit trails.
Can the agreement be revoked?
Yes, subject to the agreement terms and applicable law. Parties typically include termination or amendment sections specifying notice, effective date of revocation, and steps to unwind allocations. Mutual rescission requires documented consent and reallocation calculations where needed.
How long should records be kept?
Retain executed agreements for the term plus a post-termination period; federal standards require three years for tax records (IRC §6501(a)), and HIPAA-covered records require six years (45 CFR §164.530(j)). State rules may impose longer periods.
Does signNow support these requirements?
signNow supports legally binding eSignatures under ESIGN and UETA, offers HIPAA support with a BAA, maintains SOC 2 Type II and ISO 27001 certifications, supports 21 CFR Part 11 controls, provides detailed audit trails, and exports signed PDFs suitable for retention.

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