T he manufacturers' representative is one or more persons acting as an independent proprietor, partnership or corporation who represents two or more related but non-competitive lines in a well defined and exclusive territory. He or she is compensated primarily on a commission basis for goods shipped or billed from the factory or company represented. Manufacturers who want to lower and stabilize sales expenses relative to the actual flow of orders can turn to manufacturers' representatives to augment their sales and marketing function. The representative must maintain independence from the principal and should not be expected to report selling time on any form of call reports. Due to monitoring by the Internal Revenue Service, manufacturers must be particularly careful to maintain an independent relationship with the representative, and not to give any idea that the representative is a direct employee of the manufacturer.
Representatives have no authority to legally bind the principal into a contract.
Typically, the manufacturers' representative receives credit for all sales within the territory. As part of the sales operation the representative maintains a sales office, compensates clerical and sales personnel, and assumes responsibility for all sales operating expenses. In addition, the representative will not take title on goods unless the arrangement includes working with a limited distributorship or if a stocking representative agreement is made with the factory seeking this arrangement. A representative's function - The primary function of the manufacturers' representative is to sell products to a specific industry or market. A representative must be able to respond quickly to customer service requests within a sales territory.