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How to Write an Engagement Letter in 7 Easy Steps

Sick of creating engagement letters from scratch for every new client? Create your perfect template in seven easy steps.

You know you should use  engagement letters  in your tax resolution cases, but you need to figure out what your engagement letter should look like. Or you've finally decided to update the same old letter you've used for years. You may be fine-tuning your current letter, intent on taking it from great to flawless. Regardless, in seven simple steps, you're in the right place to learn how to construct an engagement letter properly.

1. Introduction

The introduction of your engagement letter has two purposes — to lay out the letter's purpose to the client and to set the letter's tone. The introduction doesn't need to be complicated. State that the letter's purpose is to document key components of the engagement, such as scope and pricing. It's better to keep the entire letter's tone simple and to the point. Just because this is a legally binding document doesn't mean it needs to read like fine print.

2. Scope of the engagement

One of the most important functions of an engagement letter is to define the scope of the engagement.

It would be best if you were as specific as you need to be for each engagement, but at a minimum, your engagement letter should detail:

• The services offered. The more specific you can be, the better. For instance, stating that you will prepare and submit a doubt about liability offer in compromise is far more useful than offering generic “tax resolution.”
• The term of the engagement. Generally, this is a specific time (e.g., one year) or until services are completed, whichever is first.
• A disclaimer/limitation of liability statement. This is your chance to clarify what you don’t guarantee or what related services are not a part of the engagement (e.g., appeals representation).

No matter how you  structure your fees , your pricing for each engagement should be clearly stated in the engagement letter. Your clients desperately want to trust you but will likely hesitate to extend that trust. By detailing the fees and expenses the client can expect throughout the engagement, you can ensure that you never — even unintentionally — break the client's trust by springing an unexpected expense on them.

Your engagement letter should include information such as:

• The total they can expect to pay to your practice
• Fees due upfront
• Available discounts (e.g., for full payment upfront)
• Potential penalties (e.g., for late payments)
• Expenses paid to the IRS (e.g., application fees)

It’s also a good idea to include language explaining that in rare, extraordinary cases, the engagement will prove to be significantly more complicated than expected. In such cases, you can reserve the right to adjust your fees to reflect the additional time or expertise required, promising to notify the client promptly if their case will require such an adjustment.

4. Termination and refund

If, for whatever reason, you and your client need to terminate your arrangement early, it's nice to have a built-in eject button. If your firm offers a refund for any unperformed services, be sure to clarify the terms.

5. Client expectations

We can't cover every potential clause your practice might need to include in your engagement letters. Consider your policies and the needs of your practice, and include language that addresses them as necessary.

If certain things tend to break down in your client relationship, consider building provisions in your engagement letter that mitigate those risks. For example, if you constantly wait weeks for a client to respond with needed information, create a communications clause in your engagement letter. If you insist that the client defer all contact with the IRS to you and others within your practice, make that clear in the engagement letter. The engagement letter is the place to put all your expectations in writing.

6. Signature block and date

Nothing is complicated here; don't forget to leave a space for signatures and dates at the end of the document.

7. Save yourself some time

Once you've put together an excellent engagement letter, save it. Use it as a template for all of your future engagement letters. Adjusting each letter's specifics should take less than 10 minutes for each new engagement if you have a good template in place.

Engagement letters are essential for any firm; take the guesswork out of your relationship with your clients and create a good roadmap for communication. By following these seven steps, you will quickly become an expert in writing your letters. 

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Chris is a content manager for Canopy, joining the team with a combined eight years of experience as a copywriter, editor-in-chief, and content marketer. He's a skilled wordsmith and strategic thinker who shapes brand identity through compelling content and fosters a collaborative and innovative environment. With a passion for storytelling and a dedication to excellence, he is a driving force behind any company's success in content marketing. Champion of the Oxford comma.

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• TemplateLab
• Engagement Letters

50 Editable Engagement Letter Templates (Free)

An engagement letter is more common in the business world than anywhere else. This is a written contract that explains the business relationship between two parties, usually a business establishment and a client. The main purpose of letters of engagement is to set the expectations for both parties involved in the agreement. This is typically intended to describe what services to deliver (the scope of work ), terms and conditions, compensation, and deadlines.

Table of Contents

• 1 Engagement Letter Samples
• 2 The importance of an engagement letter
• 3 Letter Of Engagement Templates
• 4 What to include in your engagement letter?
• 5 Consulting Engagement Letters
• 6 How to prepare an engagement letter?
• 7 Bookkeeping Engagement Letters (CPA)
• 8 How does an engagement letter work?
• 9 Lawyer Engagement Letters

Engagement Letter Samples

The importance of an engagement letter

Letters of engagement are the basis of many legal relationships in the world of business. Once the parties concerned have signed it, an engagement letter constitutes a legally binding agreement between two parties . For instance, you can begin a business relationship with the new client using a letter of engagement template. There are three important reasons why you need to have this communication:

• It binds the relationship or partnership legally You can have a great start with your relationship when you have a legally binding contract in place as this lends security to both your client and yourself. The engagement letter can be your go-to guide in case there is a disagreement between yourself and the other party .
• It sets the expectations Tax resolutions clients going through a difficult experience will expect you to give them foresight on what they need to do. They may want to see more specific language pricing, the scope of the services you offer, and how changes in the agreement may occur to better their predicament. Knowing what to expect from the very start can boost the client’s confidence which you both need to move forward. For tax experts, you need an engagement letter sample to specify expectations. These can include the importance of open communication, the need for your clients to be very honest with their taxes, and straightforward about all their financial issues while you’re in agreement.
• It prevents miscommunication Your relationship with your clients starts with a verbal agreement. You might not even know that this is already an agreement, but after several consultations, you may open things that the client may understand as agreements or promises. But the introduction of a letter of engagement template takes much of the guesswork out of your business relationship. After coming to an agreement, you set everything on paper. Then you both affix your signatures. There is no need to try to remember the exact amount you quoted to your clients in the consultations. The fee will be in the letter and the client won’t feel surprised anymore when you charge them an extra fee for representing them in an appeal or for providing additional services.

Letter Of Engagement Templates

What to include in your engagement letter?

The best and most effective letters of engagement make use of a stand-alone “ terms-and-conditions ” document that they incorporate. This makes the letter shorter, thus, more appealing to clients. Following are the elements to include in your letter of engagement template:

• Identification Properly identify the individual, group, entity or part of an entity who will receive your services.
• Scope of your services This is perhaps the most important section of any engagement letter sample. This includes the scope of services that you will help mitigate and serves as a guard against clients who would develop unreasonable expectations regarding the services you offer. Be very clear and specific about the services you include.
• Engagement period Specify the dates on when the engagement begins and ends. If applicable, you may also include the expected delivery dates if there is an expected deliverable involved.
• Fee structure Make a detailed presentation of how often and how much you plan to bill your client. Don’t forget to include any extra services that the client requested which aren’t part of the letter. There should also be a clause in the letter that specifies what would happen in case of delayed payment. This could either be a suspension of services or a late fee.
• Responsibilities In most engagement letters, the client has the responsibility to perform certain actions and provide certain records or information. In detailing the responsibilities of the client, be very specific and demand the information you’re relying on so you can accomplish the service.
• Professional standards Refer to the professional standards that govern the engagement as these may vary from one place or area to another.
• Confirmation of terms The last part of your letter of engagement template should include the confirmation of terms. This signifies that your client understands the contents of your business agreement .

Consulting Engagement Letters

How to prepare an engagement letter?

Usually, an auditor would first create an engagement letter to strengthen audit arrangements between the client and the audit firm. The letter itself can serve as a contract and would detail the duties and responsibilities of both parties.

It isn’t really a necessity to have a written contract with an audit client but it’s considered unwise to conduct an audit when you only have a verbal agreement. To whom you will addressing the letter depends on the business entity. Here are some guidelines for you:

• If you’re working with a company, the right addressee to the letter will be the board of directors .
• If the client is only a small company that doesn’t have its own board of directors, you can address your letter to the chief executive officer.
• If you’re auditing a sole proprietorship, address your letter directly to the owner.
• For partnerships, address the letter to the partners.

After determining who to address your letter to, it’s time to start writing. Here are a few steps to guide you:

• Think about the objectives of your letter For instance, for a financial statement audit , your objective is to give your opinion regarding the financial statement.
• State the responsibilities of management These may vary depending on the terms and conditions of the agreement. For instance, the management has the responsibility to provide financial statements along with the proper application of generally accepted accounting principles.
• Your responsibilities These also can vary. For instance, for an audit of financial statements, one of the responsibilities is for you to conduct the audit in accordance with the generally accepted auditing standards.
• Any limitations of your engagement You should remember that the purpose of an audit is to provide assurance that the financial statements don’t contain any material misstatements. But because you won’t examine the transactions directly, there is always a risk that illegal acts, material errors or fraud can exist.
• State hiring restrictions One general condition of an engagement letter sample is that your client won’t try to hire anyone who works on the audit team. Usually, there is a required 1-year “cooling-off period” that exists when you work on a client audit. This means that you shouldn’t accept a position in the company until that time passes.
• Other items to include Your fees and the dates you expect to get paid. Any plans of hiring specialists in the company’s field to help you out. The conditions under which you can terminate the engagement.

Bookkeeping Engagement Letters (CPA)

How does an engagement letter work?

An engagement letter establishes the business relationship between two parties. It sets limits on the obligations of a company, either by inference or directly. Many businesses including auditors, lawyers, consultants, and accountants routinely use letters of engagement, whether their clients are large corporations or individuals.

This letter can also serve to define the scope of services. For instance, when a business or an individual hires the services of a lawyer, the letter can explain the specific purpose in doing so or the field of expertise to apply the services. A contractor can hire a lawyer to create a land purchase document but cannot ask the same for legal advice about other issues. The letter won’t state that fact as badly but it will convey a clear meaning.

With the letter in place, the client receives reassurance of knowing when the service will get accomplished and how much it costs. Moreover, the letter also clarifies that other costs not included in the agreement must come from the client. With this letter, you can set the boundaries that you expect. This has a number of benefits including:

• It prevents any “scope creep,” something that all lawyers and tax accountants dread.
• It cites services that aren’t included in the agreement but might get added in the future. This should come with a cost estimate for the additions.
• It may also include a clause about binding arbitration or mediation for the business relationship. This can provide guidance for dealing with disputes that arise between the parties.

In cases when the relationship between you and the business is going to be long-term:

• Most companies require engagement letters to get updated and signed by the client on a regular basis. This is a good idea if you plan to extend your business relationship.
• This allows for changes in the business relationship as time goes by.
• It also strengthens the document’s legal standing.
• It reminds the client of the scope which could, again, prevent “scope creep.”

Lawyer Engagement Letters

More Templates

Behavior Contract Templates

Consulting Contract Templates

Handyman Contracts

Letter of Agreement

Letters Of Guarantee

Breach Of Contracts

Writing Business Engagement Letters

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Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom. Also note: This is not legal advice.

Introduction

When it comes to the legal process, engagement letters are an essential part of the package. These documents serve as agreements between a lawyer and their client, laying out exactly what services will be provided, any fees that may be involved, and more besides. It’s a crucial step in protecting both parties’ rights, interests, and understanding of their respective roles.

At Genie AI we understand how important an effective engagement letter can be - that’s why we provide free templates for anyone seeking to draft and customise high-quality legal documents without paying a lawyer. Our community template library is powered by millions of data points which teach our AI system what makes up a market-standard engagement letter - giving you the confidence you need to produce one with accuracy and efficiency.

Engagement letters are beneficial for multiple reasons; they help establish an agreement between lawyer and client before any work commences; clarify what services will (or won’t) be included in their scope; protect the rights of the lawyer; and safeguard interests of the client - making sure they understand what they’re getting from their legal professional at a fair price.

It’s important to remember that using this guide doesn’t require you to have a Genie AI account - all we want is to help ensure everyone has access to quality document templates at no cost. To get started on your very own engagement letter, simply read on below for our step-by-step guidance or access our template library today!

Definitions (feel free to skip)

Recipient: Person or entity that the letter is addressed to. Tone: Attitude or feeling expressed in a piece of writing. Overview: Brief summary or description of a situation. Benefits: Something that provides a positive outcome or advantage. Offerings: Goods or services that are available for sale. Agreement: Formal contract or understanding between two or more parties. Timeline: Sequence of events arranged in chronological order. Payment Terms: Conditions and rules related to the payment of a debt or service. Gratitude: Feeling of appreciation or thankfulness.

Establishing the Purpose of the Letter

Clearly state why you are sending the letter and the desired outcome., establishing the tone of the letter, use a tone that is professional and respectful., introducing yourself and your business, provide a brief introduction of yourself and your business, including relevant contact information., explaining the benefits of your offerings, explain the advantages of your services or products and how they could benefit the recipient., outlining your offerings, explain what services or products you are offering., establishing expectations, set expectations for both parties in regards to the agreement., setting a timeline for engagement, establish a timeline for the agreement and any related deadlines., establishing payment terms, include any relevant payment terms or conditions., expressing gratitude, show your appreciation for the client’s consideration of your offer., requesting a reply, request a prompt reply from the recipient., closing the letter, provide a polite closing and thank the recipient for their time., get started.

• Brainstorm the purpose of the letter, the main goal of the communication, and the desired outcome.
• Develop an outline of the content of the letter that is tailored to the purpose.
• Craft the opening sentence to clearly articulate the purpose of the letter.
• Confirm that the purpose of the letter is adequately established and conveyed.

How you’ll know when you can check this off your list and move on to the next step:

• When you have an outline for the letter that clearly states why you are sending the letter and the desired outcome.
• Outline the key reasons why you are writing the letter, such as introducing your business, providing a proposal, offering a request, or thanking the recipient
• Describe the desired outcome of the engagement letter, such as a reply, a signature, or further action
• Make sure that the purpose of the letter is clear and concise
• When you are done, you will know that the purpose of the letter is established and the desired outcome is clear and understood by the recipient
• Read the letter from the recipient’s perspective to ensure the tone is professional and respectful
• Use a formal, polite language appropriate for the recipient
• Ensure the tone of the letter is consistent with the purpose of the letter
• Avoid using overly technical language and jargon
• Check that the tone of the letter is not too casual or too formal
• Proofread the letter to ensure the tone is appropriate
• When the tone of the letter is established, you can move on to the next step.
• Use appropriate grammar, spelling and punctuation.
• Avoid using slang, jargon, and abbreviations.
• Address the recipient in a polite manner.
• Choose words that are clear, concise, and friendly.
• Refrain from using overly formal language.
• Avoid using humor or sarcasm.

When you have written your letter in a professional and respectful tone, you can check this step off your list and move on to the next step.

• Begin the letter with a formal salutation, such as “Dear [Recipient Name]”
• Introduce yourself and your business, including any relevant contact information like phone number, email address, and website
• State why you are writing the letter and the purpose of your engagement
• Provide a detailed description of the services your business provides
• Be sure to include any relevant credentials or certifications
• End with a formal closing such as “Sincerely,” followed by your name and contact information

Once you have included this information in your letter, you can move on to the next step of your guide.

• Introduce yourself. Write a brief paragraph about yourself and your background. Include any relevant qualifications or experience. • Introduce your business. State the name of your company, and provide a brief description of what it does. • Include contact information. Provide an address, telephone number, email address, and website for your business. • You can check this off your list when you have included all the necessary information about yourself and your business in the introduction.

• Explain the benefits of your services or products in terms of how they can help the recipient achieve their goals.
• Focus on the value that your services or products offer, rather than details about the product or service itself.
• Provide specific examples of how your offerings can help the recipient.
• Describe the unique features of your services or products and how they can be beneficial to the recipient.
• Explain how your services or products can make the recipient’s life easier, more successful, or more enjoyable.

Once you have included all of the necessary information, you can move on to the next step.

• List out the advantages and benefits of your services or products
• Explain how they could benefit the recipient
• Provide concrete examples when possible
• Ask yourself if the recipient will understand the advantages and benefits you’re offering
• Make sure the language used is clear and concise
• Check that you’ve explained the advantages and benefits in a way that will create interest in the recipient
• When you’re satisfied that you’ve conveyed the advantages and benefits of your services or products, you can move on to outlining your offerings.
• Research the services or products you are offering and make a list of all the features and benefits of each
• List the features of each service or product in a clear and concise manner
• Include any additional features your competitors do not offer
• Highlight the key features that are most important to the recipient
• List the cost of each service or product and any additional charges
• List any discounts or promotions that you are offering
• When you have finished outlining your offerings, review them to make sure they are clear and complete
• When you are confident that your offering is complete, you can move on to the next step.
• Describe the services or products you are offering in detail.
• Include how the services or products will benefit the recipient.
• Make sure to include the length of the agreement, any associated costs, and any deadlines.
• Once you have finished outlining the details of your offering, you can move on to the next step.
• Determine a timeline for deliverables and/or payment.
• Agree on any terms or conditions for the services or products offered.
• Outline the scope of responsibilities for both parties.
• Include any additional expectations that need to be met.
• Specify any rules or regulations that apply to the agreement.
• Draft the engagement letter and have each party sign it.

Once you have determined the expectations and outlined them in the engagement letter, you can check this step off your list and move on to setting expectations for both parties in regards to the agreement.

• Make sure both parties understand the terms of the agreement, including length of the agreement, payment terms, any deadlines, and the specific services you will be providing. • Clear communication is key, so discuss any expectations you have and make sure that both parties agree. • Outline the timeline for the agreement, including any deadlines or milestones that need to be met. • Create a document that both parties can sign to indicate their agreement and understanding of the expectations. • Once both parties have signed the document, you can move forward with the agreement.

• Set a timeframe for the agreement and any related deadlines
• Consider the length of the agreement, the milestones that need to be reached, and any potential changes that must be made
• Make sure to include an end date when the agreement will officially end
• Establish a timeline for both parties to follow and include any specific deadlines or milestones that must be met
• Clearly outline when payments or other deadlines must be met, and the consequences for not meeting them
• When the timeline is agreed upon, put it in writing and get both parties to sign off on it
• Once the timeline has been set and agreed upon, mark it off your list and move on to the next step.
• Set a timeline for the agreement, including a start date and completion date.
• Note any related deadlines that need to be met throughout the agreement.
• Decide if deadlines will be flexible depending on the circumstances.
• Include any deadlines in the engagement letter.
• Once the timeline and deadlines have been established, you can check this off your list and move on to the next step.

• Outline the payment terms for the agreement, such as when payments are due, the payment method, and any late payment fees. • Specify the currency of payment and how payments should be made (e.g., wire transfer, check, etc.). • Include any discounts that may be available for early payment. • Indicate the terms for any deposits, if applicable. • Provide information on any refunds or returns policy. • When complete, review and edit the payment terms to ensure accuracy and completeness. • Once the payment terms are finalized, you can move on to the next step.

• Include payment terms in the letter, such as when payment is due, any late fees that may apply, and how payment should be made.
• If the payment is due on a certain day, make sure to express that in the letter.
• If you are providing goods or services on credit, include information on when the payment is due and any additional fees that may apply for late payment.
• Specify whether payment should be made by check, money order, credit card, or other methods.
• When you have included all relevant payment terms and conditions, you can move on to the next step.
• Express your appreciation for the opportunity to work with the client.
• Thank the client for taking the time to consider your offer.
• Mention any specific reasons why you value their consideration.
• When you have finished expressing your gratitude, you can check this step off your list and move on to the next step.
• Thank your client for taking the time to consider your offer.
• Make sure to include a sentence or two emphasizing your appreciation.
• Make sure to use a polite and professional tone throughout your letter.

Once you’ve thanked your client and demonstrated your appreciation, you can move on to the next step.

• Include a statement asking for a prompt response to your offer
• Make sure to provide clear information on how to reply, such as contact information
• Suggest a specific timeline for when you expect a response
• Include a polite reminder that you are looking forward to hearing from them soon
• Once you have received a response, you can move on to the next step in the guide.
• End the letter by stating the desired response and timeframe in which it is expected.
• Ask the recipient to reply in writing as soon as possible to confirm they understand the request.
• Provide information on how they should respond, such as via email or regular mail.
• State that you look forward to hearing from them and thank them for their time.
• You can check this off your list when you have successfully requested a prompt reply from the recipient in the letter.
• Close the letter with a phrase such as “Sincerely” or “Best regards.""
• Sign the letter with your name, title, and contact information.
• Include a copy of the document you are sending with the letter.
• Address an envelope with the recipient’s name and address.
• Place the letter and any other enclosures in the envelope and seal it.
• Mail the package.

When you can check this off your list and move on to the next step:

• Once you have addressed the envelope, placed the letter and enclosures in it, sealed it, and mailed it, you can mark this step as complete and move on to the next step.
• End the letter with a closing such as “Sincerely”, “Regards”, or “Best” followed by a comma.
• Sign the letter in blue or black ink and type your name underneath.
• Include a postscript thanking the recipient for their time and consideration.
• Proofread the letter one last time to make sure it is error-free.
• When you have included a polite closing, signed the letter, added a postscript, and proofread the letter thoroughly, you can check this off your list and move on to the next step.

Q: Does the US require a formal business engagement letter?

Asked by Emily on April 21st, 2022. A: In the US, it is not required to have a formal business engagement letter, although it is often beneficial to do so. In some cases, there may be industry standards or specific legal requirements that require you to have a formal business engagement letter. It is always best to check with your industry regulator, or local legal authority, regarding the rules and regulations in your specific jurisdiction.

Q: How do I create a business engagement letter?

Asked by Jacob on May 1st, 2022. A: Creating a business engagement letter is not difficult. Generally speaking, you will want to include the names and addresses of both parties involved in the agreement; a clear and concise statement of the services to be provided; any applicable deadlines or dates of completion; payment terms; and any other relevant provisions. Additionally, you will want to make sure the letter is legally binding and that it adheres to all applicable laws in your jurisdiction.

Q: What should I include in a business engagement letter?

Asked by Emma on June 15th, 2022. A: Generally speaking, you will want to include the names and addresses of both parties involved in the agreement; a clear and concise statement of the services to be provided; any applicable deadlines or dates of completion; payment terms; and any other relevant provisions. Additionally, you may also want to include details about confidentiality, non-disclosure agreements, and other contractual obligations that may be necessary for your particular business engagement.

Q: What is an example of a business engagement letter?

Asked by Joshua on July 4th, 2022. A: A business engagement letter should clearly state the purpose of the agreement between two parties as well as any applicable deadlines or dates of completion. Below is an example of a business engagement letter:

Date: [date]

From: [Name & Address], [Company Name]

To: [Name & Address], [Company Name]

Re: Business Engagement Letter

This letter is written to confirm our agreement regarding [description of services], which will take place between [date] and [date].

The following are details of our agreement: [List each detail here.]

Payment Terms: [List payment terms here.]

Confidentiality Agreement: [List confidentiality provisions here.]

Signature: __________

Q: How do I format a business engagement letter?

Asked by Noah on August 10th, 2022. A: Generally speaking, when formatting a business engagement letter you should include the following information at minimum: date; from (name and address); to (name and address); subject line; body (which should include details about services being provided, payment terms and confidentiality provisions); signature line. Additionally, if there are any other provisions that are necessary for your particular agreement then these should be included as well. The formatting should be neat and easy to read with clearly labeled sections for each provision.

Q: Is it necessary to have a lawyer review my business engagement letter?

Asked by Madison on September 2nd, 2022. A: It is always best practice to have a lawyer review your business engagement letter before signing it as they can provide valuable advice regarding legal requirements in your jurisdiction which may be applicable to your agreement. Additionally, they can ensure that all provisions are legally binding and that all relevant laws are being adhered to.

Q: Are there differences between US law and EU law when writing a business engagement letter?

Asked by Ava on October 7th, 2022. A: Yes, there are some differences between US law and EU law when writing a business engagement letter. Generally speaking, US laws tend to be more lenient than those in the EU with regards to contract formation and enforcement. In addition, certain EU countries may have specific regulations regarding certain aspects of contract formation such as data protection or consumer protection laws which may not exist in the US. It is always best practice to be aware of these differences when drafting your agreement so that all applicable laws are being followed.

Q : Are there different guidelines for writing a business engagement letter in different industries?

Asked by William on November 22nd, 2022. A: Yes, there can be different guidelines for writing a business engagement letter depending on the industry you are operating in as certain industries may have their own specific regulations or requirements which must be adhered to when drafting an agreement. It is always best practice to familiarize yourself with any industry-specific guidelines so that all relevant laws are being followed when drafting your agreement.

Q : What language should I use when writing my business engagement letter?

Asked by Olivia on December 1st, 2022. A: It is important to use language that is clear and unambiguous when drafting your agreement so that both parties understand their obligations under the contract without any confusion or misunderstanding. Additionally, it is important to use language that clearly states all relevant information such as payment terms and deadlines so that there is no confusion moving forward with regards to expectations or responsibilities under the contract.

Q : Is it necessary for both parties involved in a business engagement letter to sign it?

Asked by James on January 3rd 2022. A: Yes, it is necessary for both parties involved in a business engagement letter to sign it in order for it to be legally binding and enforceable under contract law in most jurisdictions. It is also important that both signatures are accompanied by date stamps so that there can be no confusion regarding when each party signed the agreement moving forward if needed for enforcement purposes at any point down the line.

Q : Is there anything else I need to consider when writing my business engagement letters?

Asked by Abigail on February 9th 2022. A: When writing your agreements it is important not only consider all relevant laws but also industry standards which may apply such as those governing professional conduct and ethics codes which could affect how you carry out certain activities related to performing services under your agreements such as consulting or advising services related activities governed by codes such as ABA Model Rules of Professional Conduct or UK Solicitors Regulation Authority Code of Conduct etc… Additionally you should consider any other relevant information related specifically to your particular agreement such as intellectual property rights ownership etc…

Example dispute

Suing for breach of contract based on an engagement letter.

• Plaintiff may prove breach of contract by showing that the other party did not fulfill the terms of the engagement letter.
• The plaintiff must show that they had a valid contract and that the defendant breached it.
• The plaintiff must show that they suffered damages as a result of the breach.
• The court may look to the engagement letter to determine the parties’ rights, obligations, and the scope of the agreement.
• The plaintiff may be able to recover damages for their losses, legal fees, and other costs associated with the breach of contract.
• The parties may be able to reach a settlement if one party is willing to offer the other financial compensation in exchange for satisfaction of the terms of the engagement letter.

Templates available (free to use)

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Engagement Letter Example and Template

An engagement letter might sound like an entirely different beast on the surface, but it is an important document for your business. While people who are not in the industry might think that you are talking about an agreement between two people working toward matrimony, this is not quite what an engagement letter is. When you’re asked to write one, you may be confused about what wording you should use and what kind of things should be agreed upon. Therefore, when entering into this particular business agreement, it is important that you do your research.

What Is an Engagement Letter?

An engagement letter might sound like a letter written by or to people entering into a matrimonial agreement; it is actually a letter written as an agreement between two businesses or between a client and a company. An engagement letter details the terms of an arrangement – the agreement, the terms, and the cost. It sets the expectations for both sides of the arrangement so that everything is outlined initially.

This is less formal than a business contract, so it is not necessarily legally binding and can be more fluid. It is important that, before entering into any kind of business agreement, you should have a contract drawn up.

Engagement Letter (Word Template)

Download: Microsoft Word (.docx)

How to Write an Engagement Letter

When writing a “good” engagement letter, you need to make sure that you have a few things.

• A Good Introduction: Much like a contract, you need to have a solid introduction that outlines things for both parties. This is especially important as this is a legal document.
• Specifying the Services to Be Delivered: The services being delivered should be specifically outlined within the document. This makes sure both parties understand the scope of what will be performed.
• Specifying the Timeline: All services have a timeline in which they should be delivered. It is important that this timetable is outlined within the letter so that both parties have a mutual understanding of when a service will be provided.
• The Terms of Payment: Including how the client will pay you or how often you will be paid by the client is important so that financial issues will not arise later in your business arrangement.
• What You Expect From the Client: Making sure to outline what is expected from the client is important so that you can have a better working relationship and the client knows what they will need to do.
• What the Client Should Expect From You: Outlining what you will do when you will be available and what they need. This could be updated on the status of a project or, maybe, a non-compete clause.
• Signatures: Both parties must sign this document so that it becomes legally binding. It is best practice to do this in front of a notary so that each party sees the legality of the document.

Following these steps when writing an engagement letter will see that you have a solid agreement written between you and your clients.

Sample Engagement Letter

Eugene Ryder Accounting Services

Gregory Hilldebrandt

123 Main Street

New York, NY 12345

RE: Accounting Services for Carlisle and Associates, LLP

Dear Mr. Hemingway,

This Engagement Letter (“Letter”), dated March 4, 2022, confirms the services requested by Carlisle and Associates, LLP (“Client”) and provided by Eugene Ryder Accounting Services (“Service Provider”).

The services provided under this Letter are as follows: Full accounting services for the year ending December 31, 2022

The fees charged for providing the services are:

• $75 / Hour.

In addition, the Client may be charged for any additional administrative fees, filings, or any other costs not directly or indirectly related to the services.

Upon receipt of the signature by the Client of this Letter:

A retainer will be required in the amount of $1700.

The primary contact for the Client in regard to the services mentioned in this Letter shall be the following:

Individual’s Name: Gregory Hilldebrandt

Phone: 812-555-4321

E-Mail: [email protected]

Under this Letter, the services shall be terminated under the following:

• Upon completion of work.

The Client shall always be required to provide truthful information to the Service Provider in a timely manner. If any information produced by the Client is not accurate, the Service Provider shall be protected from any legal, financial, or other liability as a result of such information.

IN WITNESS WHEREOF, the Client and Service Provider agree to the terms and conditions contained in this Letter.

Client’s Signature _______________ Date March 4, 2022

Service Provider’s Signature _______________ Date March 4, 2022

How an Engagement Letter Works

An engagement letter works much like a contract. Fortunately, this is still legally binding, but it usually avoids legal jargon, making it much easier for both parties to read and understand. The terms are all agreed to and briefly outlined within the document, making it much shorter than a contract. These letters limit the responsibility of the business, whether directly or indirectly.

An engagement letter also limits the services that a company will provide. This will outline the kinds of services that a company will provide a client during this particular venture.

Benefits of Engagement Letter

An engagement letter is beneficial because it sets expectations from the very beginning. This is important in any relationship. You are giving the client the security of when a service will be delivered and what it will cost. As a business, you are setting important boundaries about what is expected of you, as well. This helps to make sure that your business does not get dragged into unnecessary work or legal battles. It can also provide guidance on what to do if a legal issue were to arise.

In an ongoing business relationship, you may need to continuously update your engagement letter to make sure that all parameters are met.

While an engagement letter might seem like work added to a contract, it is one of the most beneficial documents that you can utilize in a business relationship. An engagement letter is as legally binding as a contract but is easy to understand for you and your client without the unnecessary legal jargon. Overall, a letter of engagement is the best way to protect your business while setting expectations upfront.

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Engagement letters: why they're important and what to include (with 12 samples)

Many people see engagement letters as a burden and a waste of time. That’s the wrong mindset to have.

Engagement letters are an important tool that smart practices use to grow their business while mitigating risk.

In this article we're going to walk you through why they're so important, what you should include in yours and share a few samples.

We'll also show you tips to fully automate your engagement process using Ignition.

The importance of engagement letters

Engagement letters define the business contract between a professional firm and its clients. It outlines the fee structure, responsibilities and obligations of the firm and the client. Without it, each party can be in legal limbo.

While verbal contracts are legally binding, they are notoriously difficult to enforce. Just agreeing on something won’t necessarily hold up in court if it comes to that.

They serve a bigger purpose than just business contracts though:

Engagement letters help you set expectations.

Engagement letters also help lay a solid foundation for a working relationship between a practice and their clients. They ensure transparency and demonstrate professionalism from the get-go.

Engagement letters reduce scope creep.

When you’ve set expectations with your client and clearly laid out what’s included with your services, you’ll reduce scope creep. You can also specify how you will proceed if the client needs more work done.

Engagement letters help you reduce risk.

Using engagement letters can help reduce professional liability insurance (or E&O insurance) premiums and many insurers require it. If insurers require them, then engagement letters must reduce liability and risk of doing business.

That makes it prudent to have engagement letter templates than your practice uses when onboarding new clients . They allow your practice to grow while limiting exposure to potential litigation.

How do I get an engagement letter?

Further down in this post we give you plenty of examples of engagement letters. Feel free to browse through them and find one that fits your needs.

You can use our recommendations and the samples below to build your engagement letter templates.

That being said, every case will be different. Always have an attorney look over your engagement letters before you put them in use.

What to include in your engagement letter

Luckily, here at Ignition we have access to a slew of different engagement letters from practices all over the world. We’ve analyzed over 100 engagement letters and found that the majority have the following sections:

Keep it simple.

The most effective engagement letters we have on the Ignition platform use a stand alone terms-and-conditions document that they reference within the engagement letter. This shortens the engagement letter, which makes it more approachable to clients.

See Interactive Accounting’s terms and conditions as an example. They reference their terms-and-conditions page from within their engagement letter. When the client agrees to the engagement letter, they also agree to the terms and conditions.

Think about including the following sections in your terms-and-conditions as opposed to your engagement letter:

• Billing practices (including your terms for late payment)
• Alternative dispute resolution
• Withdrawal provisions
• Limitations of liability
• Intellectual property, ownership of data and data protection
• Confidentiality agreement
• Privacy policy

Now that we’ve covered terms-and-conditions, here are the sections that most engagement letters include:

1. Identification

You should properly identify who will receive your services. It may be an individual, a group, an entity, or a portion of an entity – it’s important to specify.

John Matthews 1027 42nd Street, Manhattan, New York City, 10036

This letter is to confirm our understanding of the terms of our engagement and the nature and limitations of the services that we provide.

Ignition tips for client identification:

• Specify the client’s name with {{ client.name }}
• Include the client’s address with {{ client.address }}
• Specify the client’s preferred {{ contact.salutation }}

2. Scope of services

Scope of services is probably the most important part of the entire engagement letter. By including your scope of services you help mitigate scope creep and guards against the client developing unreasonable expectations about the services to be performed.

Be very clear with what your services include.

Service: Ledger Conversion, Setup and Training

We will setup a brand new Xero account for the entity named above. In this setup service:

• We will create and configure your chart of accounts
• We will convert your data from your existing accounting system to bring in your historical balances, contacts, payroll, sales and payable invoices.
• We will setup (up to 3) data feeds for your entities' bank and credit accounts and create automated bank rules for easy reconciliation of your transactions.
• We will customize up to 5 reporting templates for your business. *Configuration of additional reports can be purchased separately.*
• We will Review and suggest appropriate additional software to increase efficiency in your accounting and bookkeeping.
• We will provide 2 x 2 hour online training sessions (up to 5 team members per session).
• We will record and deliver your training sessions via our hosted Vimeo channel (password protected).

Please note: Your subscription to Xero is not included in the scope of this service.

Terms of Service:

• If data in your previous system is not ready for conversion, you will be requested to have our team review the data and correct the errors before the migration is started. This will require extra service and you will be provided with a new engagement and charged separately unless otherwise stated.
• The data is required to be provided at least 14 days prior to go live date to ensure there are no issues. Should this not occur, you may be sent an updated engagement with additional fees for “rush conversion”.

Ignition tips for scope of services:

• Include a summary of the services added to the proposal with {{ proposal.service_summary }}
• Include your terms for each service added to the proposal with {{ proposal.service_terms }}

3. Period of engagement

Specify when the engagement will begin and end. You can also include expected delivery dates if there’s a specific deliverable (ex. an audit).

This engagement starts on February 1st, 2018 and is valid until February 1st, 2019. We will not deal with earlier periods unless you specifically ask us to do so and we agree.

Ignition tips for period of engagement:

• Add a start date with {{ proposal.commencement_date }}
• Include the end date with {{ proposal.end_date }}

4. Fee structure

Detail how much and how often the client will be billed. It’s advisable to also add in what will happen should the client request extra services not covered by the engagement letter

You may include a clause that specifies what happens in the case of late payment. It can be a late fee or suspension of service.

On Acceptance Ledger Conversion, Setup and Training - $2,000

Monthly Recurring Monthly Bookkeeping - $800/month

All prices are inclusive of tax.

The fee arrangement is based on the expected amount of time and the level of staff required to complete the services as agreed. The fee excludes miscellaneous expenses which are incurred to complete the engagement.

Should the client need extra services not included in this engagement we bill at a rate of $150 per hour (subject to approval by *practice name*).

Ignition tips for fee structure:

• Include a price summary which breaks down your services by billing type with {{ proposal.price_summary }}
• Output the total on acceptance value with {{ proposal.on_acceptance }}
• Output the total on completion value with {{ proposal.on_completion }}
• Output the total recurring amount with {{ proposal.recurring }}
• Output the total cost with {{ proposal.total_cost }}

5. Responsibilities

In most engagements, the client is responsible for specific actions and to provide certain information or records. Be specific with what the client’s responsibilities are and state what information you are relying on the client for in order to fulfill the service.

The Client is responsible for the reliability, accuracy and completeness of the accounting records, particulars and information provided and disclosure of all material and relevant information. Clients are required to arrange for reasonable access by us to relevant individuals and documents, and shall be responsible for both the completeness and accuracy of the information supplied to us. Any advice given to the Client is only an opinion based on our knowledge of the Client's particular circumstances.

A taxpayer is responsible under self assessment to keep full and proper records in order to facilitate the preparation of a correct return. Whilst the Commissioner of Taxation will accept claims made by a taxpayer in an income tax return and issue a notice of assessment, usually without adjustment, the return may be subject to later review. Under the taxation law such a review may take place within a period of up to [ ] years after tax becomes due and payable under the assessment. Furthermore, where there is fraud or evasion there is no time limit on amending the assessment. Accordingly, you should check the return before it is signed to ensure that the information in the return is accurate.

6. Professional standards

Refer the professional standards which govern the engagement. This varies depending on your location (ex. it may be the Professional Standards Authority if you’re in the UK or the Professional Standards Council if you’re in Australia).

The conduct of this engagement in accordance with the standards and ethical requirements of *insert ruling body* means that information acquired by us in the course of the engagement is subject to strict confidentiality requirements, in addition to our obligations under the *insert confidentiality act*.

That information will not be disclosed by us to other parties, without your express consent, except as required by law or professional obligation.

7. Confirmation of terms

The bottom of your engagement letter should include the confirmation of terms which verifies that the client understands the business contract.

I/We hereby accept the terms of your engagement letter.

Signed: Full name:

Ignition tips for confirmation of terms:

• Include the client’s signature at the bottom of the engagement letter with {{ signature.client }}
• Include your signature and name inline on an accepted proposal with {{ "Your Name" | signature }}

Sample engagement letters

We've collected a number of sample engagement letters from various countries that practices are using with their clients.

Just know that we don’t personally endorse any of these examples. They are simply samples that we found around the web. Use at your own risk:

Engagement letters for Australia & New Zealand

Tax engagement letter (AU & NZ)

This is the engagement letter that McCarthy Accountants use for their individual income tax return clients: McCarthy Group's tax client engagement letter .

CPA Engagement Letter (AU & NZ)

This is the general engagement letter that CPA Australia gives to its members. It doesn’t include specific service terms but is a great starting point for any Australian CPA firm: CPA Australia's general engagement letter .

Audit Engagement Letter (AU & NZ)

This is a general example of an audit engagement letter by the Chartered Accountants of Australia & New Zealand: CAAN's sample audit engagement letter .

Bookkeeping Engagement Letter (AU & NZ)

The Institute of Certified Bookkeepers recommends the following template for their members. It includes service terms for bookkeeping services, payroll, BAS and more: ICB's bookkeeping engagement letter .

Engagement letters for Canada

Tax engagement letter (CA)

Lott & Company Professional Corporation uses the following engagement letter for their personal tax clients in Canada: Lott & Company's tax engagement letter .

CPA Engagement Letter (CA)

Cardy Winters & Simon LLP is a CPA firm and uses this template for their tax clients: CWS's CPA engagement letter .

Audit Engagement Letter (CA)

This is a sample engagement letter that KMPG used for an audit: KPMG Canada audit engagement letter .

Bookkeeping Engagement Letter (CA)

Madan Chartered Accountant uses this simple engagement letter with their bookkeeping clients: Madan CA's bookkeeping engagement letter .

Engagement letters for the United Kingdom

Tax engagement letter (UK)

This is the engagement letter template that Mackenzies Chartered Accountants uses with their personal tax return clients. They have their terms-and-conditions attached at the bottom as well: MK Chartered tax engagement letter .

General Engagement Letter (UK)

iPlan is a firm lead by Chartered Accountants that provides accounting services to owner managed businesses and this is the template that they use: iPlan's general engagement letter template .

Audit Engagement Letter (UK)

TWP Accounting LLP uses this engagement letter template when they provide auditing services to a client: TWP's audit engagement letter .

Bookkeeping Engagement Letter (UK)

The UK chapter of the Institute of Certified Bookkeepers recommends the following bookkeeping engagement letter: ICB's UK bookkeeping engagement letter .

Engagement letters for the United States

Tax engagement letter (USA)

Thompson Flaherty are a CPA firm & tax consultants based in Illionois who use the following template for their tax engagements: Thompson Flaherty's tax engagement letter .

CPA Engagement Letter (USA)

Erwin CPA group uses this general engagement letter with their corporate clients: Erwin CPA engagement letter .

Audit Engagement Letter (USA)

AccountantsWorld provides cloud solutions for US based accountants and this is the audit engagement letter they recommend: AccountantsWorld audit engagement letter .

Bookkeeping Engagement Letter (USA)

Barlow Halls & Douglas CPAs use this simple and effective bookkeeping engagement letter with their clients: Barlow Halls & Douglas bookkeeping engagement letter .

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Letter Templates

45 Engagement Letter Samples (Free Templates) – Word, PDF

An Engagement Letter is a formal letter that acts as a legally binding document between a client and a third-party consultant.

The document highlights the type of work being offered by the professional and the amount to be paid by the client.

Licensed professionals usually require an engagement letter to help identify their relationship with the client according to the State laws and fulfill their compliance policies.

The letter is meant to briefly and accurately relay the project or services that are to be delivered, the deadline for the services, and the compensation. The basic components of this form include the scope, fees, and responsibilities of both parties.

Some of the professional services that utilize this engagement letter include bookkeepers, lawyers, accountants, attorneys, and real estate agents. With an engagement letter, the two parties are bound to perform their expected parts and uphold the agreement terms as mentioned in the document.

Get Help from Engagement Letter Templates

A professional looking to prepare an engagement letter can get help from engagement letter samples and templates found online. They can download the letter as Adobe PDF or an MS document. With the samples, a professional can be sure that all the components are present and filled in before them and their clients sign the document.

The engagement letter samples also act as examples in case a professional decides to write their own engagement letter instead of using the templates already provided.

Following are some free downloadable templates for you:

What is a Retainer?

A retainer is defined as the amount paid as an advance by the client to the third party consultant for the services being offered but yet to be completed.

It is usually part of the engagement letter since it signifies the commitment of the client regarding the deal at hand between them and the professional third party. A retainer also acts as a security deposit for the professional offering their services.

Note: Although an engagement letter does not fall under a formal contract, it can still be used in a court of law since it is a legally binding document. That means both parties who sign it must uphold all that was agreed upon.

How the Engagement Letter Works

Any firm that offers professional services must prepare an engagement letter. It remains valid for the period of time mentioned, and both or either party can choose to exit out of the agreement.

Here are the details of how an engagement letter works. Engagement letters, once crafted and signed by both parties, provide clear details of the type of services the professionals are offering their clients. In case the professionals are offering various services, then they will have to prepare multiple engagement letters.

Since an engagement letter can remain valid for a long period, the third-party consultants and their clients are advised to review it on a yearly basis. This way, all the terms of the agreement will continue to be upheld, and updates on the document can be made appropriately. Finally, either the professional third party or their clients can opt-out of the agreement based on the conditions of the termination clause included in the letter.

Types of Engagement Letters

There are three types of engagement letters used by different professionals who require this document.

They include:

This engagement letter is used for bookkeeping. It can also be used for accounting purposes like tax filing and audit consulting services for individual clients or businesses.

It usually highlights the scope of the work to be provided by the third party, including the timeline and the compensation to be made by the client. In addition, according to their professional liability insurance, both accountants and bookkeepers should have a signed engagement letter before they begin their work.

Download: Microsoft Word (.docx)

Legal professionals utilize this engagement letter to detail the services they will perform on behalf of their clients.

With this letter, a client can hire another client to offer them legal services. Both parties will have to discuss the extent of the work to be done and the payment, which is usually pair per hour. An attorney or lawyer usually requests a retainer, which acts as the advance payment for future services, before they can begin offering their legal services.

The attorney later on bills the client through an invoice once the work is completed.

This engagement letter is designed to be used by professionals who offer consultancy services aimed at sharing their expertise in a particular field with their clients.

With this engagement letter, the client usually deals with a professional who will offer them services, advice, or knowledge in a certain area in exchange for money.  The professional, in this case, tends to be an expert with great knowledge and experience in that field.

Components of an Engagement Letter

Although engagement parties may be different from each other, professionals should ensure that the engagement letter they prepare contains certain components before the signing of the document takes place.

Details of both parties

Information regarding the parties to the agreement should be clearly indicated in the engagement letter. Both the professionals’ and the clients’ details, including the names and addresses, are essential and must be highlighted first in the document.

Both parties should also include their signatures and the date of signing the engagement letter at the end.

The professional should open the engagement letter by greeting the client and being thankful for the business offer. They should first identify their name, their position, or job, then present their work proposal.

For example:

“I, Albert Leo, a qualified bookkeeper in the State of Massachusetts, propose to complete the project stated below for QRZ Company.”

Types of service

Whether it is accounting services, bookkeeping, or legal services, the type of service being offered to the clients should be well-included in the letter.

The professional should specify the type of service they are proposing to deliver, the payment process, and when they send the invoices to their client. The client should have the proper information in regards to what exactly the professional will do and what they will not do. It is best to list the tasks in bullet form to be sure about all the services expected or promised.

Specific service detail

After mentioning the type of service being offered, it is also important for the professional to provide clear and specific details of the services to avoid misunderstanding. This way, the amount to be paid for services offered, the quality of the services being offered, and the deadline for offering the service can be easily included in the engagement letter.

If the professional firm is offering accounting services, this section should specify which kind of accounting service it is, which may be auditing or filing taxes.

The engagement letter should also include the duration of the tasks by highlighting the due date. This way, both parties can mark this date on their calendar and handle their responsibilities to meet the due date.

Responsibility of each party

The engagement letter must highlight the role that the third party and the clients will carry out. Each party should understand their responsibility before signing occurs, and work begins.

The client should provide all the professional needs before the work begins. Usually, the professional evaluates a project, lists their needs, and then informs the client who must provide everything by a particular agreed-upon date.

The professional might need to access the client’s accounts, require certain contact information, and know the payment dates, kickoff dates, and meeting dates.

On the other hand, the professional should inform the client on how they can access the draft, the software, reports, and presentations of the project they are handling. In the case of prior discussions, the professional should provide the client with the non-compete clause as they send the letter.

Payment details

The professional firm should provide the payment details for the services they will offer their clients. This includes the total amount for the services being offered, the retainer to be paid before work commences, the amount to be paid after completion, and the payment channel to be used.

The professional should be specific on their payment process and when they want the payment to occur. They should provide their flat rate, possible project costs, and hourly rate. The professional can also include fees related to late payments and early terminations. They should also specify any discounts they will offer the client or reimbursements in case they deliver the work late.

The third party should also tell their client if they would like to receive their payment in one lump sum or in installments. In case the agreement for payment is in installments, the payment frequency should also be included in the letter. This way, the client is aware of when they will be receiving the invoices.

This section of the engagement letter includes the overview of the services offered, the limitations, and the requirements the client should uphold to view the finished work.

Validity and termination

The last section of the letter usually indicates how long the engagement letter will be valid. The letter might be valid until work is completed or until a particular date that should be mentioned in the letter. In relation to dates, the letter should mention the specific start and end date of the service.

For the termination section of the letter, a termination clause should be included by the third party. The clause contains information regarding how either party can exit from the agreement and the reasons that might render the engagement letter terminated.

Engagement Letter Samples

Benefits of Engagement Letter

The engagement letter offers a variety of benefits.

Prevention of scope creeping

With an engagement letter, professionals like accountants and attorneys can prevent the scope from creeping. This means that the letter will help to define the boundaries of the services being offered; hence, the client will not, for instance, request any extra services without payment and cause scope creep.

Also, services that will be required later on alongside their estimated costs can be mentioned in the letter, and this will hold the client liable for payment of these services. With the clear mention of the services expected from the professionals and the costs to be paid by the clients, the letter helps to prevent scope creeping.

The engagement letter can also provide information about any required form of arbitration or mediation for the professional and the client’s relationship. A clause can be included that provides guidance in case the two parties are involved in a conflict and how the mediation process will take place.

For a long-term relationship, if the professional is a firm or company, they will request the client to sign an updated version of the engagement letter annually. This way, the necessary changes will be made, and the relationship, together with the legal standing of the document, will be strengthened. The client will also be aware of the scope of the work agreed upon in the contract and prevent a conflict that might arise from “scope creeping.”

Changes that might be made when the signing and updates occur include an hourly rate, the mandated hours, and even the scope of work.

Reduction of misunderstandings

With an engagement letter, both parties can have a good working experience since there will be reduced misunderstanding. A professional will avoid any guesswork since the work scope, limitations, responsibilities, and fees to be paid will all have been agreed-upon mentioned in the letter.

Legally binding agreements

An engagement letter is a legally binding agreement that helps to cushion professionals in case any agreement is broken. Either party can take legal actions against the other if the terms of the agreement are not upheld as stipulated in the letter. This helps to reduce counterparty risk.

Setting of expectations

A professional should always prepare an engagement letter before offering their services in order to set expectations for their clients. This means that the client will be aware of the exact service that will be offered by the third party and the deadlines of each task mentioned.

Also, the professionals will also access all the information that a client needs to provide to set the expectations for the services.

Final Words

An engagement letter is a simplified and legally binding document between a third party or professional firm and its clients. The letter highlights the services to be offered and the payments to be made after completion. Accountants, bookkeepers, attorneys, and any other professionals providing particular services usually use engagement letters. These professionals use this letter to define their relationship with their clients and uphold their compliance policies. An engagement letter is beneficial, and a professional should write it.

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WTO / Business / Engagement Letter – Uses, Format, Free Templates

Engagement Letter – Uses, Format, Free Templates

The engagement letter is a legally binding agreement that establishes the terms of the business relationship between a company and its clients.

It helps the company communicate what the client should expect in terms of the service it will provide. It includes information such as the scope, costs, and responsibilities of both parties, among other details.

It is often used by professional firms. These firms may provide accounting, legal representation, consulting, and auditing services, among others. In addition, the letter can be used when communicating with individual clients and corporations. This letter helps ensure that the customer knows what to expect from the company.

Establishing expectations helps to reduce the risk of conflict that may lead to litigation by either party. It also helps protect the company’s payment by setting up a fee structure for the client. Companies must clearly understand when and how often they should use a letter, what should be included in it, and its benefits.

These details will help ensure that companies utilize the document appropriately and include the right details. This article will help elaborate on these details while also providing templates and samples to help you create an effective engagement letter.

Free Letter Templates

When and How Often is It Used?

A company should create a letter before starting its business relationship with a new client. Though it is less formal than a contract, it is a legally binding agreement. It plays an important role in ensuring that the company communicates appropriately to its client without using the legal jargon associated with a contact. It contains the company’s services to its clients, its terms and conditions , cost, deadlines, and other details.

The information relayed in the letter is effective for a long period. However, companies should review the document to make appropriate updates. This review can be done annually. Significant changes to pricing, terms, and conditions, the scope of service, or the services offered to the clients may warrant changes to the letter.

A new engagement letter or supplement letter can be created to outline the updates the company would like to make. The reviews and updates made to it help the company maintain its professional standards. A termination clause that allows both parties to exit the engagement under certain applicable conditions should be indicated. 

What to Include in the Letter

Companies must clearly understand what to include in the letters. The components of the letter help ensure that information is appropriately conveyed to clients. It also helps ensure that key details are not left out of the agreement.

The following information should be contained in the letter:

Parties identification

This letter should begin by identifying the parties involved. It will help identify who the service provider is and who the client is. The document should specify whether the client is an individual, group, or partial entity.

 James Smith 456 Main Street, Atlanta, Georgia 14560

Service type

Secondly, the type of service that is being provided to the client by the company should be identified. It helps clarify what the client should expect from the company. The statement identifying the type of service the company will provide should be short and straightforward.

Dear James, This is to confirm the legal services being provided by James and Jane LLP.

Specific service details

Thirdly it should provide specific details about the services the client should expect to receive. A brief description of the services will help the company avoid misunderstandings with the client.

The services that will be provided under this letter are legal consultation services.

Scope of service

Next, the company should outline the scope of its services. It helps create an understanding of the work that needs to be done. It will also help reduce scope creep.

Our firm will consult on a business-related matter. Our services will include:

• Conducting legal analysis and researching legal matters
• Reviewing your legal documents
• Providing advice on legal matters

Period of engagement

It should also outline when the engagement starts and ends. The company can go further by specifying the delivery date for specific deliverables if any. It will help highlight the due date and enable the client to follow up on the progress of the work .

The engagement will begin on March 6 th ,2021, and end on March 10 th ,2023.

Fee structure

A clear fee structure outlining the cost of the services provided to the clients should be indicated. The free structure should include information on how and when the payments will be expected. In addition, the company should establish how it will go about changing for extra services the client may request that have not been indicated in the letter. A clause outlining what will happen in the event of late payment should also be included.

Our hourly rates are$ 62. This amount is based on the time spent consulting on issues that may be brought to us. An extra $170 for any additional services that are not indicated in this engagement letter.

Responsibilities of each party

A brief description of the responsibilities of each party throughout the engagement should be outlined. The client may be responsible for certain actions and providing specific information, among other responsibilities. It will help ensure that both parties are clear on what they need to do to ensure it goes smoothly.

The client will be responsible for providing relevant information and documentation. Access to business documents should also be granted to aid in the provision of appropriate advice. The advice provided is simply an opinion, and the client is free to accept or decline it. On the other hand, we will provide informative, reliable advice to help the client. We  are also responsible for maintaining  our client’s confidentiality

Professional standards

The letter should contain a statement assuring the client that professional standards will govern the engagement. The standard will depend on the location of the parties involved.

The engagement will be governed by the standards and requirements of The State Bar of Georgia.   This, therefore, means that we are bound by state law to ensure the confidentiality of our client’s information and the provision of reliable information.

The company should also include a disclaimer to help establish the limitations of the service. It helps avoid confusion and complaints that may be brought about by a lack of understanding of the company’s services.

The firm will only provide the services listed for the period indicated. The client will need to seek legal representation elsewhere for any matters that must be brought before a court. The client shall also be informed of any updates or changes to the firm’s services that may occur within the set period.

Validity and termination

A brief statement should be indicated highlighting that the letter is valid until the due date or till the complete delivery of the service. It helps reassure the client of the company’s commitment to the terms they have laid out. It should also contain a termination clause . The clause provides information on why the engagement may be terminated. It also outlines how the relationship can be ended.

The agreement is valid for four years. At which point it can be terminated. It can also be terminated without notice by either party.

Related: Contract Termination Letter

Confirmation of term

Lastly, it should end with confirming the terms laid out within it. The statement is used to verify that the client fully understands the document. Both parties must review and sign the document against their names to show that the terms are agreeable to them.

We hereby accept the terms outlined in the engagement letter. Signed: Full name:

Professional Letter of Engagement Template

[Your Name or Firm’s Name]

[Your or Firm’s Address]

[City, State, Zip Code]

[Email Address]

[Phone Number]

[Today’s Date]

[Client’s Name]

[Client’s Address]

Dear [Client’s Name],

We are pleased to confirm our understanding of the services we are to provide for you and the objectives of our engagement. This letter outlines the scope of our services, terms of engagement, and fees arrangement.

1. Scope of Services:

We will provide the following services: [Describe the services you will be providing in detail, such as consulting, legal representation, accounting services, etc.]. Our work will be carried out in accordance with the [relevant standards/legislation governing your profession, e.g., Generally Accepted Accounting Principles, American Bar Association Guidelines, etc.] for the purpose of [state the purpose, e.g., compliance, advisory, litigation support].

2. Term of Engagement:

This engagement will commence on [Start Date] and will conclude on [End Date or conditions for the conclusion of the engagement]. Any changes to the scope of our services or the term of engagement must be agreed upon in writing by both parties.

3. Fees and Payment Terms:

Our fees are based on [describe the basis for your fees, such as hourly rates, fixed fees, etc.], and will be billed as follows: [describe the billing schedule, e.g., monthly, upon completion of certain milestones]. Payment is due within [number] days of receipt of our invoice. Details of any out-of-pocket expenses that will be billed to you and our rates for additional services outside the scope of this engagement are as follows: [provide detailed information on expenses and rates for additional services].

4. Confidentiality:

We will maintain the confidentiality of all information provided by you within the bounds of the law. All documents and information entrusted to us will be returned upon the conclusion of the engagement or upon your request.

5. Termination:

Either party may terminate this engagement with written notice. In the event of termination, you agree to compensate us for all work completed up to the point of termination and any out-of-pocket expenses incurred.

6. Agreement:

This letter constitutes the entire agreement between [Your Name or Firm’s Name] and [Client’s Name] regarding the services outlined above. Any modifications to this agreement must be made in writing and signed by both parties.

Please sign and date the enclosed copy of this letter to acknowledge your acceptance of the terms of our engagement and return it to us at your earliest convenience.

We appreciate the opportunity to work with you and look forward to a successful engagement. Please do not hesitate to contact us if you have any questions or need further clarification on any aspect of this letter.

[Your Name]

[Your Title]

Acknowledgment by Client:

I/We have read and agree to the terms of this engagement letter.

Client’s Signature: _______________________

Date: ___________________

Sample Letter of Engagement

Dear Ms. Carter,

We are excited about the opportunity to work with Atlas Enterprises, Inc. and are pleased to confirm our understanding of the consulting services we are to provide. This letter outlines the scope of our services, terms of engagement, fee arrangement, and other relevant terms as agreed upon during our preliminary discussions.

Bright Solutions Consulting Firm will provide strategic consulting services aimed at enhancing Atlas Enterprises’ operational efficiency and market penetration. Specifically, we will conduct a comprehensive analysis of your current operational processes, market positioning, and competitive landscape. Based on our findings, we will develop a tailored strategic plan that includes actionable recommendations for improvement and growth.

This engagement will commence on March 1, 20XX, and is expected to conclude by August 31, 20XX. Any extension of this term will require mutual agreement in writing by both parties.

Our fee for the services outlined in this engagement letter is $50,000, payable in monthly installments of $10,000. The first payment is due upon the commencement of our services, with subsequent payments due on the first of each month. This fee is inclusive of all direct labor costs but exclusive of out-of-pocket expenses, which will be billed separately. Expenses incurred on behalf of Atlas Enterprises will be pre-approved and documented.

Bright Solutions Consulting Firm agrees to maintain the confidentiality of all proprietary information provided by Atlas Enterprises during the course of this engagement. All documents and electronic data provided will be returned or destroyed upon request at the conclusion of this engagement.

Either party may terminate this engagement with 30 days’ written notice. Upon termination, Atlas Enterprises will be invoiced for services rendered and out-of-pocket expenses incurred up to the termination date.

This letter represents the entire agreement between Bright Solutions Consulting Firm and Atlas Enterprises, Inc. concerning the subject matter hereof and supersedes all prior agreements, understandings, negotiations, and discussions, whether oral or written.

Please indicate your agreement with these terms by signing and dating the enclosed copy of this letter and returning it to us. We are confident that our services will provide significant value to Atlas Enterprises and look forward to a productive and successful partnership.

Thank you for choosing Bright Solutions Consulting Firm.

Principal Consultant

Bright Solutions Consulting Firm

Name: Emily Carter

Title: CEO, Atlas Enterprises, Inc.

Key Takeaways

The sample engagement letter is effective in several ways:

Clear Scope of Services: The letter clearly outlines the scope of services Bright Solutions Consulting Firm will provide to Atlas Enterprises, including conducting analysis and developing a strategic plan. This ensures both parties have a mutual understanding of the project’s objectives and deliverables.

Defined Terms of Engagement: It specifies the start and end dates of the engagement, providing clarity on the duration of the consulting services. Additionally, it establishes a procedure for extending the engagement if needed, requiring mutual agreement in writing, which prevents misunderstandings about project timelines.

Transparent Fee Structure: The letter clearly states the consulting fee, payment terms, and the inclusion of direct labor costs but exclusion of out-of-pocket expenses. This transparency promotes trust and understanding between the consulting firm and the client.

Confidentiality and Termination Clauses: The engagement letter includes clauses regarding confidentiality of proprietary information and termination procedures, protecting both parties’ interests and ensuring confidentiality and smooth transitions if the engagement is terminated.

Comprehensive Agreement: It serves as a comprehensive agreement between Bright Solutions Consulting Firm and Atlas Enterprises, Inc., covering all essential aspects of the consulting engagement. This clarity reduces the likelihood of disputes and ensures both parties are aligned on the terms and conditions.

Acknowledgment Section: The inclusion of an acknowledgment section allows the client to confirm their agreement with the terms outlined in the letter, ensuring mutual understanding and consent.

Overall, the engagement letter effectively establishes the framework for the consulting engagement, clarifies expectations, and promotes a productive and successful partnership between Bright Solutions Consulting Firm and Atlas Enterprises, Inc.

Types of Letters

The kind of letter created will depend on the company’s services. However, understanding a few types will aid in easing the creation of the letter. The following are three types of letters that you may need:

Accountant (CPA) / bookkeeper engagement letter

An accountant (CPA ) letter describes the overall relationship that will be shared with the client regarding the accounting services a company will provide. It is used primarily by service providers who file taxes or provide auditing services. Both parties must sign this letter for it to be legally binding.

Attorney engagement letter

An attorney letter is used by legal professionals who provide legal services to clients. This type of letter must be clear on the specific services that will be provided, as a wide range of services can be provided. Often, advance payment or a fee retainer may be among the terms outlined by the service provider.

Consultant engagement letter

A consultant letter is issued by a service provider who provides advice or knowledge for a fee. The individual is usually an expert with vast experience and extensive knowledge of the matter. It may indicate that the service provider charges per hour or project.

Benefits of Using an Engagement Letter

There are a few advantages associated with using this letter. Understanding the benefits of the letter helps in the creation of a document that communicates more effectively.

The benefits include the following:

• Helps reduce misunderstandings: Using it helps reduce misunderstandings by outlining the terms of engagement. The details indicated in the letter help ensure that both parties are clear on issues like the scope of the service, deadlines, and the type of service that will be provided, among other details.
• Reduces exposure to potential litigation: This letter reduces the risk of litigation by ensuring that both parties are bound by the agreement. Therefore, both the company and the customer must fulfill the terms outlined in the document. Either party can seek damages if the other does not meet its obligation.
• It helps set expectations: The letter helps ensure that both parties will be satisfied with the outcome. Setting expectations also shows the professionalism of the company. It facilitates a successful business engagement between the company and its client by encouraging open and honest communication.
• Reduces scope fright: A clear letter helps reduce scope fright by allowing the company to lay out what will be included in the service. It also allows the company to plan how it will engage with the client if more work needs to be done.

More Examples

Frequently Asked Questions

A retainer is a fee paid by the client upfront to secure the services of a company or service provider. It is commonly used by professionals such as attorneys and consultants, among others. The retainer signifies the client’s commitment to work with the company.

Reviewing the letter sample can help a company obtain an engagement letter. A quick web search will provide an individual with different samples to aid them in creating their letter.

Yes, this letter is legally binding, even though it is less formal than a contract. However, both parties must sign it for it to be considered legally binding.

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Engagement letter – a simple guide to what it is, how it works, and how to write one with example

Jenny Pak Director of Program Management at PandaDoc

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If you’re a provider of professional services, engagement letters are essential—not just to set the terms of the client relationship, but to protect you from litigation.

For example: in 53% of all claims asserted against CPA (Certified Professional Accountant) firms in 2021, there was no related engagement letter.

In this post, we’ll share our guide to engagement letters and show you how to write one.

Key takeaways

• An engagement letter is a written agreement between a client and a service provider
• It sets expectations, outlines responsibilities, and avoids misunderstandings
• Engagement letters are legally binding once signed
• You can improve efficiency by using an automated letter of engagement template.

What is an engagement letter

An engagement letter is a written document that establishes a business relationship between a client and a provider of professional services—usually financial, legal, or consultancy.

It’s a brief but specific description of the relationship, including terms and conditions, scope of work, and fees.

Simpler than a formal contract, it’s still a legal document that protects the interests of both parties.

It helps service providers manage client expectations by specifying exactly what’s provided, which reduces the risk of confusion or dispute.

We’ll take a look at a sample engagement letter a little later in this post.

How an engagement letter works and when you should use one

Engagement letters are suitable for many types of business.

You can adapt them for all types of professional relationships – from long-term contracts to one-off projects – and all types of clients.

The most common time to use an engagement letter is during the client onboarding process at the start of a new relationship or when starting a new project with an existing client.

It should be drafted, negotiated, and signed before any work begins .

Is an engagement letter the same as a contract

A letter of engagement is similar to a contract in that it sets out the terms of the agreement and outlines obligations for both parties.

Both documents are designed to reduce liability and serve as a written record in a dispute .

However, engagement letters are often shorter and less formal.

Why is an engagement letter important

In a professional relationship, a written agreement with clearly defined responsibilities makes it more likely that each party will uphold their end of the bargain.

Engagement letters define the specific nature of the services, including what won’t be covered.

Without a written record, either party could decide to change the terms.

Written agreements also avoid misunderstandings.

If the terms aren’t clear, the client may mistakenly think they’re entitled to additional services, or the service provider may rely on a payment that doesn’t appear as expected.

As well as marking the official start of a relationship, engagement letters also give both sides a way to end it.

They usually include a termination clause allowing either party to exit under certain conditions.

Is an engagement letter legally binding

Engagement letters are legal documents and as such, they are legally binding and can be used in a court of law.

However, it’s important to remember that the document doesn’t become binding until it’s signed by both parties.

The specific Ts & Cs can also affect its enforceability, as can the laws of the relevant country or state.

What are the benefits of an engagement letter

Here are a few more advantages of using engagement letters.

Prevents scope creep

Scope creep is when a project evolves beyond its original requirements and objectives.

It usually means that one party ends up doing extra work, and it leads to missed deadlines and frustration.

By clearly specifying the scope of work, engagement letters create boundaries to stop this from happening.

Clarifies costs

Engagement letters also ensure that clients know exactly how much the work will cost, and providers know how much they’ll earn.

They also specify what to do if there are likely to be any additional costs involved.

Both parties can budget accordingly, and nobody gets any nasty surprises.

Builds professional relationships

Transparent communication is essential for client management , and engagement letters provide the groundwork for a positive client experience .

Well-crafted documents demonstrate professionalism and trust and show clients that your services will be equally high in quality.

Reduces risk

Since engagement letters are legally binding, they reduce counterparty risk, helping firms avoid litigation.

For individual service providers who don’t have the protection of a large organization, it’s important to reduce liability with a detailed agreement.

How to write an engagement letter in 7 simple steps: what should be included

Each business and client is different, but this is the classic engagement letter format.

• Parties : Identify both parties—the service provider and the client—and include business addresses and contact details.
• Services : Briefly state the services to be performed. Be specific, and include the duration and key dates. Add a disclaimer that describes what will happen if the scope changes.
• Responsibilities: State the obligations for both parties—such as the client needing to provide certain information or the provider keeping the client updated.
• Payment terms: Outline the fee structure, billing process, and payment methods. Mention any additional expenses for which the client will be liable.
• Termination: Include a termination clause that lists the circumstances in which either party may exit the agreement—and how to go about it.
• Additional clauses: You may want to include clauses for confidentiality and security or a clause regarding dispute arbitration.
• Signature: The letter must be signed by both parties. Don’t forget the date!

Who prepares the letter of engagement

The service provider is responsible for drafting the letter of engagement, often with the help of the company’s legal team or an external lawyer .

Usually, there will be a period of negotiation during which the client may suggest revisions.

Some clients may look for additional legal advice.

How often should engagement letters be updated

In long-term relationships, it’s common to review and update the engagement letter annually .

This reminds the client of the scope and ensures both sides are still happy with the terms.

If the scope of services or anything else changes during the year, the letter must be reissued.

Tips for writing an engagement letter: use an automated template

An engagement letter template provides a starting point and ensures documents are standardized—and it’s even better if it’s automated.

• Automated templates streamline the drafting, negotiating, and signing processes, saving time for both parties. Greater efficiency and accuracy help to maintain strong relationships.
• Once you’ve found or created a suitable template, you can customize it for each client and project. Check carefully that you’ve adjusted each section—leaving a previous client’s details on a new letter is not a professional look!
• To ensure consistency and avoid disputes, use a template to pull in pre-approved sections such as price presentation and legal terms.
• Choose software that enables both sides to make suggestions and revisions directly within the document and notifies you when it’s been approved.
• Electronic signatures mean you don’t have to print or scan the letter and send physical copies or email attachments back and forth.
• If your automated templates integrate with your billing systems, clients can pay directly via the digital engagement letter—it’s more convenient for them, and you get paid faster.

Typical engagement letter sample

Now that we know what to include and why, here’s a typical engagement letter example.

Identification of Parties

Service Provider: ABC Financial Services [Business address and contact details]

Client: XYZ Manufacturing Ltd [Business address and contact details]

Engagement Duration

This Engagement begins on January 26, 2024, for the duration of one calendar year. It will terminate automatically on January 26, 2025.

Scope of Services

The Service Provider agrees to render the following services to the Client for the agreed duration of the Engagement:

• Accounting and bookkeeping
• Completion of the Client’s tax return
• Ongoing financial advice on taxation and business investments
• Monthly updates on financial performance, to be delivered to the Client in a written summary.

These services are provided for the Client’s business interests only and not for the Client’s personal finances.

The Client agrees to provide any financial information requested by the Service Provider for the purposes of carrying out the specified services.

The Engagement may be extended with written agreement from both parties in the event of changes to the scope of work.

Payment Terms

The Service Provider will charge a fixed fee of $100 per hour for the agreed services.

The Service Provider will invoice the Client by email on the last day of each month during the Engagement’s duration.

The Client agrees to pay within 10 days of the date shown on each invoice.

Payment details will be provided on each invoice.

The following payment methods are accepted: Bank transfer, Visa, Mastercard, American Express, PayPal, ApplePay.

Confidentiality

Neither party may disclose information about the other party’s finances, business transactions, or performance.

Termination

The Engagement will automatically terminate upon expiry of the agreed duration.

Either party may also terminate the Engagement for the following reasons:

• Convenience (with two months’ written notice by either party)
• Breach of the Engagement terms (the non-breaching party must provide written details of the breach and give the breaching party 10 days to fix the breach)
• Force majeure (in the event that agreed services cannot be carried out due to circumstances beyond the Service Provider’s control).

Jurisdiction

This Engagement is governed by and construed in accordance with the laws of [state/country].

Signature and Date

Client Signature ­­______________________

Date ________________

Service Provider Signature ­­______________________

Write an effective engagement letter with PandaDoc

The right software lets you create engagement letters that protect both parties and set the tone for your business relationships.

PandaDoc maximizes efficiency with its document workflow software, including ready-to-use templates and drag-and-drop editing for full customization.

Dynamic versions automatically pull client data from your CRM or pre-approved content from the legal team.

Optional content locking guards against omissions and errors.

Both sides can collaborate inside the document, with real-time access to comments, approvals, and version tracking.

Legally binding e-Signatures are built in, making the letter fully digital.

You can store (and organize) engagement letters and other docs in a single online location and receive alerts when they’re due for renewal.

PandaDoc is not a law firm, or a substitute for an attorney or law firm. This page is not intended to and does not provide legal advice. Should you have legal questions on the validity of e-signatures or digital signatures and the enforceability thereof, please consult with an attorney or law firm. Use of PandaDoc services are governed by our Terms of Use and Privacy Policy.

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