February 10, 2023
When embarking on a business partnership, expect challenges. Partners have different personalities, working styles, daily schedules, and initial investments. You need to juggle working together (possibly for the first time) while addressing market needs and differentiating yourself from competitors.
A partnership proposal can help make those challenges a little less daunting by clarifying the details of your collaboration before you even launch your business. It can get everyone on the same page, reducing the risks of detrimental disagreements later on.
But drafting such a proposal is no small task.
To help you on your journey, we’ve got step-by-step instructions and a helpful partnership proposal template.
What’s in this guide:
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Why you need a business partnership proposal
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How to create a proposal for a business partnership
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Partnership proposal template & software
Why you need a business partnership proposal
Research shows that 70% of business partnerships fail—and (here’s the good news) a clear agreement is one of the best ways to improve your odds of success.
Oftentimes, partners will equally share the burden of losses and the gift of gains. But your share should reflect what you put into the business, both in terms of time and money. So if one partner will be giving more, they should also get more out of it. By accurately calculating equity, salaries, and profit draws in advance, you can be sure that each partner is getting their fair share according to their initial investment and ongoing role in the company.
A partnership proposal with clear terms can help settle any financial or legal matters that may arise later. But on a more positive note, it will also improve the quality of your collaboration. When all the terms are laid on the table up front (and no one is guessing or assuming), communication between partners will begin with a much stronger foundation—paving the way for a more profitable relationship.
How to create a proposal for a business partnership
Creating a proposal for your business partnership is complicated, but fortunately, you don’t have to go it alone. Follow these simple steps to cover all of your bases.
Step 1. Research what your proposal should include
The first step is to research what you need to include in your proposal, such as the share of profit and loss, the managing duties of each partner, and what should happen in the event of the death of a partner. This is a critical legal document so you need to get it right..
You don’t have to get it perfect the first time, as the terms will likely require negotiation. But covering all of the necessary information will demonstrate your attention to detail and ensure that the preceding negotiations are thorough.
Make sure to research requirements that are unique to your partnership type, which usually falls into one of these 3 categories:
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General partnership - Shared day-to-day operations and liability for debts and owners.
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Limited partnership - One or more partner doesn’t participate in day-to-day operations and is not liable for debts or lawsuits (but receives profits). This is typically used for inactive investors.
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Limited liability partnership - Liability protection is extended to all partners so that no one is responsible for the actions of another partner. This is typically used for professionals operating out of shared office space, such as accountants, financial advisors, or plastic surgeons.
Because the taxation structure will affect the way that earnings are distributed and reported, you should also research details specific for your province or state of incorporation as well as your entity type (limited liability corporation, c-corp, etc.).
Brainstorm more information to include based on your unique business and what each partner brings to the table. For instance, if one partner is joining the partnership with a large social media following of ideal customers, you might want to outline how that social media account is expected to be used and what content will not be permitted on that account once the partnership begins.
If you use a partnership proposal template, you’ll save a lot of time on both research and writing. Preview our template here.
Make sure to consult with a business lawyer to get their take on the necessary terms.
Step 2. Outline your proposal
Now that you have your checklist for what to include in your proposal, it’s time to start organizing all of that information into a cohesive outline. A proposal template will save you time here. Start off with the template and then include additional terms that matter to your business.
We suggest this outline for your partnership proposal:
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Name and Business - Basic business details like business name and address.
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Term - When the agreement begins.
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Capital - How partnership capital will be maintained.
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Profit and Loss - How profits and losses will be shared and credited.
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Salaries and Drawings - How salaries and profit draws will be managed.
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Interest - Whether or not initial investments will receive guaranteed interest payments.
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Management Duties and Restrictions - How management duties will be split, and what tasks can’t be undertaken without agreement from all partners.
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Banking - What chequing account(s) will be used.
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Books - How bookkeeping will be managed.
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Voluntary Termination - How the partnership can be voluntarily dissolved, and how assets will be distributed if this occurs.
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Death - What will happen in the event of the death of a partner.
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Arbitration - Basic statement on arbitration for the agreement and the legal association that will be used.
You might be wondering if you need to add a cover letter to your outline. If you don’t need to convince anyone to join the founding team, you probably don’t need a cover letter. But if you’re trying to win over a partner, then check out this guide to writing a cover letter and add your letter to the very beginning of your proposal.
Step 3. Write the proposal sections
Time to write.
A partnership proposal has a very different style than most other business proposals, which are typically sent to prospective clients in order to win deals. For those proposals, you’re trying to sell. But with a partnership proposal, you’re trying to clarify. The prospective partner needs to know what they’re signing off on in order to give you a yes. What’s expected of them? What percentage of equity will they receive?
Because the goal is different, the writing style should be different too. Write using clear, simple, and legally accurate language for the majority of the proposal. By keeping the language of the proposal straightforward, you’ll eliminate any confusion and potential for disagreements later.
Take this text from our partnership agreement template as an example of the writing style you should aim for:
A separate capital account shall be maintained for each partner. Neither partner shall withdraw any part of his/her capital account. Upon the demand of either partner, the capital accounts of the partners shall be maintained at all times in the proportions in which the partners share in the profits and losses of the partnership.
If you need to create content to convince on-the-fence partners, you can do so with your cover letter, business plan, or presentation slides that will go along with the proposal. You might cover the addressable market, your competitive advantage, pricing model, etc.
Step 4. Add e-signatures
The next step is to add e-signatures to your proposal. This will turn the proposal into a binding agreement, so that once signed by all partners, the partnership can begin with clear terms.
You should add the e-signatures to the final page of the proposal.
Make sure that the e-signature software you use is legally binding.
Step 5. Review, sign, and send it
And lastly, it’s time to make sure your proposal is perfect. Review all of the terms and make sure you’ve covered everything in your checklist.
If you can afford it, have a business lawyer review your agreement before you sign and send it. This should be cheaper than having them draft an agreement from scratch (and can save you a lot of money and stress in the long run).
When you’re ready, sign the proposal yourself and then send it for signature to your partners.
You should not open up any bank accounts, file articles of incorporation, take out loans, or conduct any other activity with financial implications until the proposal is signed by all partners. If you do, a partner could later argue that they’re not liable. Instead, use the time before the proposal is signed to work on your business plan and research your addressable market.
Partnership proposal template & software
Proposify makes it easy to create beautiful proposals for both internal and external use. We offer 75 unique proposal templates that show you exactly what to include and help you draft your proposals quickly.
You can also design your own proposal templates, save content snippets, and track stats on proposal views and closed deals.
