Letter Offering a Partnership

Why put a partnership proposal in writing

Putting a partnership proposal in writing helps both sides understand what is being suggested and gives you a record of it. A letter works, and so does a clear email with the proposed terms attached.

Before you write, decide whether you are proposing discussions or making an offer intended to become binding once accepted, and say which in the letter. Be clear that you mean a legal partnership rather than a looser commercial collaboration. An ordinary partnership and a limited liability partnership (LLP) have different legal and filing arrangements.

If you are inviting someone to join an existing partnership, check the current agreement first. Unless the partners have agreed otherwise, all existing partners must consent to a new partner joining. Also confirm that you have authority to make the proposal on the business's behalf.

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What to include

If you have already discussed the idea, refer briefly to those discussions rather than repeating the full case. Avoid exaggerated claims about likely returns.

A typical letter will:

• state whether you are proposing discussions or making an offer
• name the business and the type of partnership proposed
• list any documents enclosed
• identify terms that are still unresolved
• invite the reader to meet and discuss the details
• say how and when they can respond

You can briefly summarise any terms already agreed in conversation, such as shares of profits and losses, the money or work each person will contribute, drawings or pay, and who can commit the business. Dispute resolution, a partner leaving and dissolution belong in the formal agreement.

If your enclosures contain sensitive financial or customer information, consider a confidentiality agreement before sharing them.

Your situation may be slightly different. ask a question below ↓ and our editorial team will reply with our advice.

Layout and practical points

A standard business letter layout suits most proposals: your name or business name and address, the date, the recipient's name and address, a subject line and a greeting. "Yours sincerely" is the usual close when you have used the person's name. These are conventions, not legal requirements.

• If you intend the proposal to stay non-binding until a formal agreement is signed, say so expressly and consider marking it "subject to contract". Do not assume the label alone will protect you if you start operating as partners.
• Do not promise anything you are not prepared to stand by.
• Give a reasonable timescale for a reply without applying pressure.
• Choose a format that suits your dealings with the recipient, and keep a complete copy of the correspondence and attachments.

Legal and tax points to check first

An ordinary partnership can arise from an oral agreement or from how people behave, without anything being signed. Take advice before you start trading together.

In an ordinary partnership, partners generally have unlimited personal liability for business debts, and one partner's actions in the course of the business can bind the partnership. The Partnership Act 1890 provides default rules on matters the partners have not otherwise agreed. These may not match your intentions. For example, the default position is that profits and losses are shared equally.

An LLP must be registered with Companies House. For an ordinary partnership of individuals, a nominated partner registers the partnership with HMRC for Self Assessment and manages its tax return. Each partner must also register for Self Assessment and report their own share. Individuals newly needing Self Assessment usually have to notify HMRC by 5 October following the end of the relevant tax year. GOV.UK has guidance on each structure.

In England and Wales, the Law Society's Find a Solicitor service lists solicitors who can draft or check a partnership agreement. Scotland and Northern Ireland have their own law society directories. An accountant can advise on tax.

Once the letter is sent, give the other person time to consider it. The next step is usually a meeting to settle the remaining terms.

The Next Step

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