Is an LOI legally binding?

It depends. An LOI can contain both binding and nonbinding sections. Courts look to wording and parties’ intent; marking confidentiality or exclusivity as binding creates enforceable obligations when clearly drafted.

Can an LOI be signed electronically?

Yes. Electronic signatures are legally valid under the ESIGN Act (15 U.S.C. ch. 96) and UETA in most states, provided intent, consent, attribution, and record retention requirements are met.

What if core terms change after signing?

Material changes typically require an amendment or new LOI; document whether previously signed terms remain in force until replaced and obtain signatures on any amendments.

Who should sign the LOI?

An authorized officer or partner who has authority to bind the entity should sign. For corporations, confirm a board resolution or officer certification when necessary.

Do LOIs require notarization or witnesses?

Generally no. Most LOIs do not require notarization or witnesses; exceptions exist depending on jurisdiction or if the LOI transfers real property interests or creates certain formal obligations.

How can an LOI be revoked?

Revocation depends on the LOI terms and any binding clauses. If nonbinding, either party may typically withdraw subject to any binding confidentiality or expense reimbursement provisions.

Equity Investment LOI

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Equity Investment Letter of Intent

Parties

Investor Name: Investor Address: Company Name: Company Address:

Recitals

WHEREAS, Investor desires, subject to the terms and conditions set forth herein and in definitive transaction documents, to acquire an equity interest in Company for the purposes described in this Letter of Intent; and

WHEREAS, Company desires to receive an investment on the terms set forth in this Letter of Intent in order to fund Company's business operations and growth initiatives; and

WHEREAS, the parties wish to set forth certain principal terms of the proposed investment as a basis for preparing definitive agreements.

Principal Terms

Effective Date:

Investment Amount: (the "Investment")

Security Type: Equity Percentage: %

Pre‑Money Valuation (if applicable):

Scope of Work

Describe the intended use of proceeds, milestones, and any deliverables or obligations of Company to Investor:

Payment Terms

Closing Payment Schedule: The Investment shall be funded as follows:

Detailed Payment Schedule / Conditions:

Late Payment Fee: If any amount payable by Investor to Company is not funded by the applicable funding date, Investor shall pay a late fee of on overdue amounts, accruing daily.

Closing and Conditions

Target Closing Date:

Conditions to Closing shall include customary items for a transaction of this nature, including but not limited to: satisfactory completion of due diligence, execution of definitive investment and ancillary agreements, authorization of Company’s board and shareholders as required, and absence of material adverse change.

Specific Closing Conditions (list any material conditions):

Term and Termination

Term Commencement Date:

Term End Date:

Either party may terminate this Letter of Intent upon written notice to the other party delivered at least days prior to termination. Termination shall not affect any binding obligations that, by their terms, survive termination.

If the parties do not execute definitive agreements by the Term End Date, this Letter of Intent shall terminate in accordance with the notice provisions above, unless extended in writing by mutual agreement.

Confidentiality

The parties acknowledge that certain information disclosed in connection with this transaction is confidential. The parties agree that confidentiality obligations shall be binding and survive termination of this Letter of Intent. Confidential information shall exclude information that is or becomes publicly known through no breach by the receiving party, is independently developed, or is required to be disclosed by law.

Acknowledgement: The parties acknowledge that the confidentiality obligation described above is intended to be binding.

Exclusivity

During the Exclusivity Period, Company shall not solicit, initiate, or encourage offers from other parties with respect to a competing investment. Exclusivity Period (in days):

Representations; Expenses

Each party represents that it has the requisite corporate power and authority to enter into this Letter of Intent. Any representations and warranties to be made shall be set forth in the definitive agreements. Each party will bear its own expenses in negotiating and documenting the transaction unless otherwise agreed in writing.

Binding Effect; Non-Binding Intent

Except for the sections entitled Confidentiality, Exclusivity, Governing Law and Expenses, which are intended to be legally binding, this Letter of Intent is non‑binding and solely sets forth the parties' mutual intentions with respect to the proposed transaction. No party shall be bound to consummate the transaction unless and until definitive agreements are executed.

Governing Law

This Letter of Intent shall be governed by and construed in accordance with the laws of: without regard to conflicts of law principles.

Entire Agreement

This Letter of Intent constitutes the entire agreement between the parties with respect to the subject matter hereof, superseding all prior discussions and understandings. Only a written instrument signed by both parties may amend this Letter of Intent.

Miscellaneous

Any notices under this Letter of Intent shall be in writing and delivered to the addresses set forth above, or to such other address as a party may designate in writing. If any provision of this Letter of Intent is held to be unenforceable, the remaining provisions shall remain in full force and effect.

Investor:

By:

Date:

Company:

By:

Date:

What an Equity Investment LOI Covers

An Equity Investment LOI (letter of intent) is a preliminary written agreement that records the principal terms and mutual intent between a prospective investor and a target company for an equity investment. It typically outlines purchase price or valuation, percentage ownership, key conditions such as due diligence and regulatory approvals, confidentiality and exclusivity provisions, and an indicative timetable toward a definitive agreement. Although often non‑binding on the economic terms, some provisions (e.g., confidentiality, exclusivity, fees) can be contractually binding when clearly stated and signed by authorized parties.

Why Prepare an Equity Investment LOI

An LOI clarifies deal economics and process steps early, aligns expectations, preserves negotiation momentum, and can lock in short binding protections like confidentiality and exclusivity while parties complete due diligence and draft a definitive agreement.

Who Typically Prepares and Signs an LOI

Lead investors, company founders, corporate development teams, and outside counsel commonly prepare and review LOIs before moving to definitive documentation.

Venture capitalists and private equity firms conducting preliminary term negotiation and exclusivity.
Startup founders or management teams negotiating valuation, dilution, and governance terms.
Corporate acquirers and strategic investors coordinating internal approvals and due diligence.

In many transactions legal counsel drafts or reviews the LOI language to preserve leverage and avoid unintentionally binding broader obligations.

Authorized Signatories

Lead Investor

General partner, authorized investor signatory, or Chief Investment Officer typically signs on behalf of an investment vehicle; they should have board or partner authorization and authority to bind the fund to exclusivity or expense obligations.

Company Founder

CEO or an officer with board authority signs for the target company; for incorporated entities, confirm signer is an officer or has a board resolution authorizing the LOI execution to avoid later challenges.

Core Sections to Include in a Professional LOI

A clear LOI uses concise sections and defined terms to avoid ambiguity. Include binding callouts for confidentiality or exclusivity and clearly label what is non‑binding versus binding.

Deal Summary

Concise statement of proposed investment amount, valuation or price per share, and resulting ownership percentages to anchor negotiations and downstream definitive documents.

Conditions

List material conditions precedent such as satisfactory due diligence, corporate approvals, third‑party consents, regulatory clearances, and any financing contingencies.

Confidentiality

State whether confidentiality obligations are binding, define confidential information, and specify duration and permitted disclosures to advisors or regulators.

Exclusivity

If present, define the exclusivity period, permitted activities, and remedies for breach; indicate whether exclusivity is binding and any carve‑outs.

Expenses & Fees

Allocate transaction costs and specify any reimbursement obligations (legal, accounting, filing fees), and whether a breakup fee applies on specified events.

Process & Timeline

Outline due diligence scope, target milestone dates, signing of definitive documents, and a proposed closing window so both parties coordinate resources.

Essential Information Fields

Party Names: Full legal names

Investment Amount: Numeric currency value

Ownership Stake: Percent or shares

Effective Date: MM/DD/YYYY

Confidentiality Period: Duration in months/years

Exclusivity Length: Number of days

How to Complete an Equity Investment LOI

Follow a consistent sequence: confirm authorized signers, populate core terms, flag binding provisions, review with counsel, and obtain signatures from all parties to finalize the LOI.

01

Confirm Authority: Verify signatories have corporate authority to bind their entities.
02

Populate Terms: Enter investment amount, valuation, ownership, and key conditions.
03

Mark Binding Clauses: Clearly label confidentiality, exclusivity, or fees as binding.
04

Execute & Retain: Obtain signatures and save executed copies for due diligence records.

Customizing and Completing the LOI Online

When building a digital LOI workflow, configure fields, signer roles, and authentication to ensure accuracy and legal validity across eSignature platforms.

Field	Configuration
Upload Template	Use PDF or DOCX; include labeled signature and initial fields.
Assign Roles	Set parties as signer 1/2 and assign reviewer roles.
Authentication	Choose email, SMS code, or stronger ID verification.
Audit Trail	Enable timestamp and IP logging for each action.

Where to Send and How the LOI Flow Works

Route the LOI according to internal approval order: preparer → counsel → investor signatory → company signatory. Retain copies immediately after signature.

Prepare: Upload final draft to eSignature platform.
Route: Send to counsel and then signers in order.
Sign: Each signer authenticates and applies signature.
Store: Deliver executed copies to all parties and legal files.

Distribution and eSubmission Options

LOIs can be delivered and signed via email links, secure signing portals, or in person; choose a method that meets your authentication and recordkeeping needs.

Email Link: Simple sender-generated link for one-click signing
Secure Portal: Requires login or multi-factor authentication
In-Person: Use tablet or paper then upload executed scan

Typical Timeframes and Deadlines

LOI schedules vary by transaction size and complexity; common timeline items include exclusivity, due diligence period, signing of definitive documents, and closing windows.

Exclusivity Period:

Commonly 30–60 days for initial diligence and negotiation

Due Diligence Window:

Typically 30–90 days depending on scope

Definitive Agreement Signing:

Often targeted within 30–90 days of LOI execution

Closing Window:

Customary 30–120 days after definitive agreement signing

Drop-Dead Date:

Longstop date to terminate if conditions unmet

Common Mistakes to Avoid

Failing to label binding vs non‑binding provisions, which can create unintended legal obligations and disputes.
Leaving due diligence scope vague, allowing surprise discoveries and renegotiations after signatures.
Assigning signing authority without verifying corporate approvals or board resolutions, risking later invalidation.
Overlooking securities law or regulatory clearances when the investor or transaction type triggers filings.

Short Risks and Consequences

Breach Liability: Monetary damages

Enforceability Risk: Unintended contractual obligations

Regulatory Exposure: Securities filings required

Lost Negotiation Leverage: Delayed or worsened terms

Confidentiality Loss: Competitive harm

Cost Overruns: Unexpected legal and diligence fees

eSignature Provider Pricing Snapshot for LOI Workflows

Comparison below summarizes starting prices and selected capabilities relevant to executing LOIs and related due diligence documents; signNow is listed first per vendor ordering rules.

	signNow	DocuSign	Adobe Sign	PandaDoc	HelloSign
Starting Price	$8/user/mo	$15/user/mo	$14/user/mo	$19/user/mo	$15/user/mo
Free Trial	7-day free trial	Varies	Varies	Varies	Varies
Bulk Send	Yes	Yes	Yes	Yes	No
Audit Trail	Yes	Yes	Yes	Yes	Yes
HIPAA Compliant	Yes	Yes	Yes	No	No
Envelope Cap	No envelope cap	100 envelopes/user/year	Varies by plan	Varies by plan	Varies by plan

Practical LOI Scenarios

Two short examples illustrate common LOI uses: an early-stage VC term outline and a strategic corporate minority investment.

VC Term LOI

A seed investor proposed $1.5M for 15% on a post‑money basis to secure a lead position and exclusive negotiation window.

The LOI set a 45‑day diligence period and binding confidentiality.
Counsel used the LOI to confirm milestones and preserved nonbinding language for valuation pending definitive purchase agreements and protective provisions for founder vesting.

Strategic Minority Investment

A strategic investor sought a 10% minority equity stake with board observation rights and limited covenants.

The LOI required sponsor consent for certain intellectual property transfers.
The LOI documented the proposed price and conditions and preserved the parties' ability to negotiate governance terms in a subsequent shareholders' agreement.

Key Deal Milestones from LOI to Close

Typical milestone sequence moves from LOI signature through diligence, negotiation, definitive agreement signing, and closing; each stage has clear owner and timing expectations.

01

LOI Execution

Parties sign LOI and begin exclusivity and diligence

02

Due Diligence

Buyer completes financial, legal, and operational review

03

Definitive Docs

Drafting and negotiation of purchase and shareholder agreements

04

Closing

Final transfers, payments, and regulatory filings complete

Frequently Asked Questions About Equity Investment LOIs

Answers to common questions about binding effect, electronic signing, signatures, revisions, and revocation for LOIs used in U.S. transactions.

Need help? Contact support

Is an LOI legally binding?
It depends. An LOI can contain both binding and nonbinding sections. Courts look to wording and parties’ intent; marking confidentiality or exclusivity as binding creates enforceable obligations when clearly drafted.
Can an LOI be signed electronically?
Yes. Electronic signatures are legally valid under the ESIGN Act (15 U.S.C. ch. 96) and UETA in most states, provided intent, consent, attribution, and record retention requirements are met.
What if core terms change after signing?
Material changes typically require an amendment or new LOI; document whether previously signed terms remain in force until replaced and obtain signatures on any amendments.
Who should sign the LOI?
An authorized officer or partner who has authority to bind the entity should sign. For corporations, confirm a board resolution or officer certification when necessary.
Do LOIs require notarization or witnesses?
Generally no. Most LOIs do not require notarization or witnesses; exceptions exist depending on jurisdiction or if the LOI transfers real property interests or creates certain formal obligations.
How can an LOI be revoked?
Revocation depends on the LOI terms and any binding clauses. If nonbinding, either party may typically withdraw subject to any binding confidentiality or expense reimbursement provisions.

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