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Business Transfer LOI

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BUSINESS TRANSFER LETTER OF INTENT

Date:

Parties

WHEREAS

WHEREAS, Seller is the lawful owner of and operates the business known as , with principal place of business at (the "Business");

WHEREAS, Buyer desires to acquire, and Seller desires to transfer, the Business in accordance with the general terms set forth in this Letter of Intent (this "LOI"), subject to the negotiation and execution of a definitive purchase agreement containing customary representations, warranties, covenants and conditions.

PROPOSED TRANSACTION

Type of Transfer:

Deposit payable to escrow agent or as mutually agreed on or before .

Late payment shall incur interest at the rate of , compounded monthly, from the due date until paid in full.

SCOPE OF TRANSFER

The transfer shall include the following items to the extent owned by Seller and transferable by law: tangible assets, intangible assets, intellectual property, customer lists, goodwill, inventory, contracts (subject to assignment), and specified liabilities as set forth below. Excluded items must be expressly listed in the definitive agreement.

DUE DILIGENCE

Buyer shall be granted reasonable access to Seller's books, records, contracts, premises and personnel for a period of from the effective date for the purpose of completing its due diligence. Buyer shall conduct due diligence in a manner that does not unreasonably disrupt Seller's operations.

EXCLUSIVITY / NO-SHOP

For a period of following the Effective Date, Seller shall not solicit, initiate or entertain offers from third parties relating to the sale, transfer or other disposition of the Business or its material assets. This exclusivity is a binding obligation of Seller.

CONDITIONS TO CLOSING

Closing of the transaction shall be subject to customary conditions, including but not limited to: satisfactory completion of due diligence by Buyer, execution of mutually acceptable definitive agreements, receipt of required third‑party consents and approvals, absence of material adverse change in the Business, and completion of any required allocations of purchase price. The parties shall use commercially reasonable efforts to satisfy these conditions.

ALLOCATION OF PURCHASE PRICE

EMPLOYEES AND BENEFITS

Treatment of employees, benefit plans and accrued wage obligations shall be addressed in the definitive agreement. Unless otherwise agreed, Buyer shall have the option to offer employment to employees of the Business on terms to be negotiated. Any assumed employee liabilities shall be expressly listed in the definitive agreement.

TAXES AND PRORATIONS

Taxes, fees and other items typically prorated or allocated in transfers of this type shall be allocated in accordance with the definitive agreement. Seller shall be responsible for any taxes incurred prior to Closing, except as otherwise provided in the definitive agreement.

EXPENSES

Except as otherwise provided in the definitive agreement, each party shall bear its own fees and expenses incurred in connection with the negotiation and execution of the definitive agreement and the consummation of the transaction; provided, however, that if the definitive agreement is terminated due to Seller's material breach, Seller shall reimburse Buyer for reasonable out-of-pocket fees and expenses incurred.

CONFIDENTIALITY

The parties acknowledge and agree that all non-public information exchanged in connection with this LOI and the proposed transaction is confidential and shall be used solely for the purposes of evaluating and consummating the transaction. Each party shall hold such information in confidence and shall not disclose it except to its employees, advisors or lenders who have a need to know and are bound to maintain confidentiality. This confidentiality obligation shall survive termination of this LOI and is binding on the parties.

TERM AND TERMINATION

This LOI shall commence on the Effective Date and shall terminate on unless earlier terminated by mutual written agreement of the parties. Either party may terminate this LOI upon providing prior written notice to the other party; provided, however, that termination shall not relieve a party of its obligations that are expressly described in this LOI as binding.

BINDING AND NON-BINDING PROVISIONS

Except for the sections entitled Confidentiality, Exclusivity / No-Shop, Expenses and Governing Law, which are intended to be legally binding, this LOI is a non-binding expression of the current intentions of the parties. Neither party shall have any obligation to proceed with the transaction unless and until definitive agreements have been executed and delivered by both parties.

GOVERNING LAW

This LOI shall be governed by and construed in accordance with the laws of the State of , without regard to rules governing conflicts of law.

ENTIRE AGREEMENT

This LOI constitutes the entire understanding between the parties with respect to the subject matter hereof and supersedes all prior discussions and agreements, whether written or oral, except as expressly provided otherwise herein.

MISCELLANEOUS

All notices required or permitted hereunder shall be in writing and delivered to the addresses set forth above (or to such other address as a party may designate by written notice). If any provision of this LOI is held invalid, the remaining provisions shall remain in full force and effect.

Seller Printed Name:

By:

Date:

Buyer Printed Name:

By:

Date:

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What a Business Transfer LOI Is and When it's Used

A Business Transfer Letter of Intent (Business Transfer LOI) is a non-binding or partially binding preliminary agreement that outlines the principal terms under which one party proposes to purchase or acquire substantially all or selected assets, membership interests, or equity of a business. It records proposed purchase price, included assets and liabilities, exclusivity and confidentiality periods, key conditions and timelines for due diligence, and steps to move toward a definitive purchase agreement. The LOI clarifies intent, allocates initial risk, and sets expectations for negotiation and closing.

Why a Clear LOI Matters for Business Transfers

A well-drafted Business Transfer LOI reduces misunderstandings, frames the scope of due diligence, and preserves negotiating leverage while defining breakup protections and timing expectations.

Why a Clear LOI Matters for Business Transfers

Who Typically Prepares and Signs a Business Transfer LOI

The LOI is a negotiation tool; parties should consult legal and tax advisors to determine which provisions should be binding versus illustrative.

  • Strategic buyers seeking control: Private equity firms or corporate acquirers evaluating targets and securing exclusivity.
  • Sellers and business owners: Documenting price, included assets, and transition terms while soliciting offers.
  • Brokers and advisors: Coordinating timelines, confidentiality, and due diligence logistics between parties.

Step-by-Step: Filling Out a Business Transfer LOI

Complete the LOI in a logical order: identify parties and transaction scope first, then price, conditions, and timing. Keep binding clauses explicit.

  • 01
    Identify Parties: Enter buyer and seller legal names and contact details.
  • 02
    Define Scope: Describe assets, equity, or divisions being transferred.
  • 03
    Set Consideration: State price, payment timing, and any contingent payments.
  • 04
    List Conditions: Specify due diligence items, approvals, and closing conditions.

Key Clauses to Include in a Professional LOI

A concise LOI balances commercial clarity with negotiation flexibility. Include clauses that define the deal's scope, money terms, protections, and next steps so both sides understand material expectations.

Purchase Price

Exact dollar amount, payment schedule, escrow terms if any, and mechanisms for adjustments post-closing (e.g., working capital true-up).

Assets and Liabilities

Clear list of included assets and expressly excluded liabilities to reduce later disputes about assumed obligations or retained obligations.

Due Diligence Scope

Specify documents, systems access, timelines, and confidentiality obligations during the investigation period.

Binding vs Non-Binding

State which sections are binding (e.g., confidentiality, exclusivity, breakup fees) and which are illustrative and subject to definitive agreement.

Closing Conditions

List regulatory approvals, third-party consents, financing, and material adverse change thresholds required to close.

Exclusivity and Break Fees

Define any exclusivity period and financial remedies for failed negotiation if applicable and agreed by parties.

Essential Information to Provide in the LOI

Buyer Contact: Name, email, phone
Seller Contact: Name, email, phone
Transaction Amount: Exact purchase price
Assets Defined: Inventory, IP, contracts
Key Dates: Effective and closing dates
Binding Items: Confidentiality, exclusivity

Supporting Provisions to Protect Both Parties

Include secondary provisions that allocate risk, preserve business continuity, and provide mechanisms for dispute resolution and transition planning.

Confidentiality

A mutual NDA clause protecting exchanged information and limiting use during and after negotiations.

Transition Assistance

Seller obligations for training, staffing transition, or service continuity for a defined period after closing.

Employee Matters

Treatment of employees, offers of employment, benefit continuation, and who bears severance obligations.

Governing Law

Specify the state law that will govern interpretation of the LOI and any disputes.

Customizing the LOI for Online Completion

Set up online workflows to ensure required fields, signer order, and authentication are enforced during e-signing and review.

Field Configuration
Required Fields Make party names, price, and dates mandatory
Signer Order Set buyer then seller sequence
Authentication Use email or SMS code per signer
Audit Trail Enable timestamp and IP capture

Distribution and eSubmission Options for the LOI

Use automated reminders, version control, and an immutable audit trail to manage signatures and preserve evidence of intent.

  • Email Deliver: Send signed PDFs with audit certificates
  • Secure Link: Provide time-limited access to execute online
  • Document Portal: Host documents for multi-party review and uploads

Common Timelines to Include in an LOI

Define clear deadlines for key events so both parties understand the negotiation cadence and can manage dependencies.

Exclusivity Period:

Typically 30–90 days for negotiations

Due Diligence Window:

Often 15–45 days depending on scope

Financing Deadline:

Date by which buyer must secure financing

Closing Date Target:

Projected closing date or month

Break Fee Trigger:

Deadlines tied to termination payments

Key Milestones from LOI to Closing

Track milestone stages to coordinate diligence, approvals, and legal work toward closing in a serial sequence.

01

LOI Execution

Parties sign LOI and start exclusivity period.

02

Due Diligence

Buyer completes document and site review tasks.

03

Negotiation of APA

Draft and agree definitive purchase agreement terms.

04

Closing

Conditions satisfied and transaction funds transferred.

Common Mistakes to Avoid When Preparing an LOI

  • Vague scope descriptions that omit excluded liabilities and lead to post-closing disputes.
  • Unclear binding language where parties assume non-binding terms are enforceable.
  • Missing essential dates or milestones that create schedule ambiguity and litigation risk.
  • Skipping counsel review for tax, employment, and regulatory issues that affect valuation.

Key Legal and Financial Risks to Watch

Binding Commitments: Unintended binding effect possible
Confidentiality Breach: Civil liability and injunctive relief
Tax Exposure: IRS adjustments risk (IRC §6501)
I-9 Compliance: Penalties for paperwork errors
Breakup Fees: Agreed liquidated damages apply
Misstated Assets: Indemnity claims after closing

eSignature Pricing Comparison for LOI Execution

The table compares core price and capability signals for executing LOIs electronically. signNow is listed first per comparison conventions.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Bulk Send Yes (Business Premium) Varies Varies Varies Varies
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Varies Varies Varies
Envelope Cap No cap 100 envelopes/user/year Varies Varies Varies

Real-World LOI Scenarios and Outcomes

Two representative examples show how LOIs set expectations and guide transaction execution in practice.

Private Equity Purchase

A PE firm used a focused LOI to secure 60-day exclusivity and financing contingency

  • Buyer required three weeks for diligence
  • The LOI accelerated negotiations and limited bidder exposure while financing closed, enabling a smooth transition to a definitive purchase agreement.

Asset Sale by Owner

A seller drafted an LOI with explicit asset lists and excluded liabilities

  • Buyer demanded escrow for working capital adjustments
  • Clear LOI terms reduced post-closing disputes and framed indemnity caps and escrow mechanics effectively.

Who Signs and Approves the LOI

Buyer — Authorized Officer

An authorized corporate officer or designated representative should sign for the buyer. This signer must have authority to commit funds and approve conditions precedent; include title and capacity in the signature block to avoid later challenges.

Seller — Owner or Manager

The seller's owner, managing member, or an authorized signatory executes the LOI. Confirm organizational authority (board resolution or power of attorney) when necessary to bind the selling entity.

How to Revoke, Amend, or Cancel an LOI

Revocations or amendments should be executed in writing and follow any notice provisions stated in the LOI to avoid claims of breach or reliance.

01

Identify Provision:

Locate LOI clause describing amendment and termination procedures.
02

Draft Notice:

Prepare clear written revocation or amendment language.
03

Serve Notice:

Deliver per LOI notice methods (email, certified mail) and keep proof.
04

Acknowledge Receipt:

Request written acknowledgment from the counterparty.
05

Record Changes:

Attach amendment or revocation to file and update versioning.
06

Update Systems:

Notify advisors, escrow agents, and lenders of change.

Business Transfer LOI — Frequently Asked Questions

Answers to common questions about enforceability, signatures, and practical next steps when using an LOI in U.S. transactions.


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