What Is a Letter of Intention?

In varying circumstances, primarily business, transactions or negotiations need to be captured in writing well in advance of a formal agreement such as a contract being drafted. A letter of intention (also referred to as an LOI or letter of intent) can be key in establishing the first steps of your business relationship.

Significance

Although it can be used in many circumstances, a letter of intention is primarily used in business as a precursor to a business transaction; in other words, a less formal contract. It takes much less time to create and can be distributed easily, even via email.

Types

Popular types of LOIs include: corporate sponsorship; marketing, programmatic or organizational support; various business ventures; or professional development.

Functions

A corporate sponsorship LOI can be used by an organization to outline sponsorship levels and associated benefits for the corporation. A marketing LOI can be used by an advertising agency to outline its market outreach or promotion media for a client. A programmatic or organizational support LOI can be used by an investor to communicate her intent to support a program or fund a not-for-profit organization. A business venture LOI can be used to outline intentions of a new business or business opportunity in gaining financial support. An LOI for the purpose of professional development can be used to detail steps an employee can take to meet goals over a set period of time.

Considerations

No two LOI's are created equal. Although you should develop a standard template, you will most likely need to customize the LOI to meet the needs of you and the other party.

Benefits

A letter of intention is a first step toward ensuring that you and the other party are on the same page about what the roles and responsibilities are. Each party should sign the LOI so there aren't any questions about the provisions of the agreement.

References

• Various Sample Letters of Intent