Include the number of albums the contract covers including the guaranteed and optional releases. The length of the contract will almost always include a set number of guaranteed albums as well as those that are considered options. Include a reasonable amount of each, with the first couple guaranteed to allow the band or artist to develop. Set reasonable goals within the contract to dictate whether the option is upheld or not.
Include the royalty rate for all music sold. Dictate which expenses may be recouped by the record company and which may not. This amount will be considered money owed and all initial royalties will go toward these expenses. After that is paid, the band or artists will receive semi-annual checks based on a percentage of the price of a CD or digital album. The royalty rate is based on the wholesale price of the physical product and a set price of the digital versions.
Indicate that the contract is exclusive so that your artists do not go out and record for other record companies. This will ensure that you will obtain the artist and they will not abuse any promotion that you perform for them. This is insurance that you will reap the benefits along with the band if they become superstars due to your hard work as a record label. The exclusivity is for the band name and members, but individual members can lend their talents to others as long as it is cleared by the record company first.
Outline the budget for recording for all guaranteed albums. This eliminates confusion when the band or artists goes to the studio to record. This number can be negotiated again later, but should be placed in a recording contract so that the band or artist understands what is expected of them monetarily. The budget for each subsequent album should be the same or more than the previous effort.
Include the amount of money that will be given to the band or artist for an advance. This is an advancement of monies that they may earn during the first album's cycle. This money is basically a loan against future record sales. If the band is dropped after their guaranteed albums, dictate in the contract whether or not the money will still be owed to the record company.