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Letter of Intent for Sale of Business

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Letter of Intent for Sale of Business

Instruction: This is a model letter. Adapt to fit your facts and circumstances.

RE: Sale of Business

Dear :

The purpose of this letter is to outline the manner in which ("Buyer"), purposes to purchase certain assets of ("Seller"). Buyer and Seller recognize that the transaction will require further documentation and approvals, including the preparation and approval of a formal agreement setting out the terms and conditions of the proposed purchase in more detail) the "Purchase Agreement"); but buyer and Seller execute this letter to evidence their intention to proceed in mutual good faith to carry out the transaction substantially in the manner outlined herein. The proposed terms and conditions include, but are not limited to, the following:

1. Assets To Be Sold. Seller will sell to Buyer its inventories ("Inventory"); fixed assets, including, without limitation, furniture, equipment, machinery, automobiles, leasehold improvements, and supplies and tools; manuals; catalogs; sales literature; files; records; customer lists; patents and trademarks (if any); registrations; its name ""; and the right to use its telephone numbers. In addition, Seller will assign and transfer to Buyer the following:

a. All equipment leases, if any, under which Seller is the lessee, relating to equipment used in its business;

b. All purchase contracts, if any, under which Seller is the purchaser, relating to equipment used in its business;

c. All purchase contracts, if any, under which Seller is the purchaser, relating to inventory sold in its business;

d. All sales contracts, if any, under which Seller is the purchaser, relating to inventory sold in its business;

e. All contracts, if any, which Seller has with its suppliers.

2. Assets To Be Retained. Seller will retain its cash, checking, savings, and trust accounts; accounts and notes receivable; advances to employees; prepaid expenses; and all its other current assets except inventories.

3. Liabilities. Buyer will assume only certain liabilities and obligations of Seller relating to the contracts and leases of equipment and the contracts of purchase and sale of inventory mentioned in section 1, above. All other liabilities and obligations of Seller, including trace accounts payable, accrued wages, and tax liabilities, shall remain the sole obligation of the Seller.

4. Purchase Price. The Purchase Price for the assets described in section 1 shall be $ (the "Purchase Price"), which shall be increased or decreased by the positive or negative difference between the value of the Inventory and the sum of $ (the value of the Inventory shown on the balance sheet of Seller on , 20__). A physical inventory for the purpose of determining the value of the Inventory will be taken as follows:

a. Between and , 20__, Seller will cause a physical count to be taken of the Inventory. The physical count will be adjusted to reflect purchases and sales in the ordinary course of business through , 20__. Buyer may appoint a representative or representatives to verify the physical count, and those representatives shall be entitled to be present at all times during the taking of the count.

b. Each item of Inventory will be priced in accordance with the supplier's latest price list in effect for Seller for shipments received before , 20__ (including freight), provided that prior to the execution of the Purchase Agreement, Seller and Buyer will segregate certain items that in their opinion should be valued separately for the purpose of computing the value of the Inventory.

5. Allocation of Purchase Price. The Purchase Price, as adjusted, will be allocated to the Inventory and to other assets as follows:

a. Inventory: $, as adjusted pursuant to section 4.

b. Furniture, fixtures, equipment, tools, supplies, machinery, leasehold improvements, and other fixed assets: $.

c. Sale Catalog: $.

6. Closing and Payment. The closing will occur on ("Closing Date"). The Purchase Price as adjusted, will be paid as follows:

a. Up to $ of the Purchase Price, as adjusted, will be paid on the Closing Date.

b. The balance of the Purchase Price, as adjusted, will be paid, with interest accruing on the unpaid balance at the rate of % per annum, over a period of years from the Closing Date.

7. Property To Be Leased. Lessor will lease to Buyer the building in which Seller currently operates its business at a monthly rental of $ per month for term of years, under a written lease satisfactory to lessor and Buyer, which will be executed and delivered on the Closing Date.

8. Bulk Sales Law. Assuming Seller has no contingent liabilities, Buyer will waive the requirements of the Uniform Commercial Code - Bulk Transfers Act with respect to notification of Seller's creditors, and Seller will hold Buyer harmless from any liability of Seller not assumed by Buyer and any liability to creditors of Seller arising out of its failure to comply with the Uniform Commercial Code - Bulk Transfers Act.

9. Conduct of Business. Until the Closing Date, Seller will use its best efforts to conduct its business in a reasonable and prudent manner in accordance with past practices; will engage in no transaction out of the ordinary course of business; will enter into no agreement or transaction extending beyond , 20__; will use its best efforts to preserve its existing business organization and relations with its employees, customers, suppliers, and others with whom it has a business relationship; will not dispose of any of the assets, except such as are retired and replaced in the ordinary course of business; will conduct its business in compliance with all applicable laws and regulations; will not make any distribution to shareholders; and will not pay any bonuses or make any salary or wage increases.

10. Access. During reasonable business hours, Seller will permit Buyer to have access to the premises in which Seller conducts its business, and to all its books, records, and personnel. Seller will furnish to Buyer such financial data, operating data, and other information as Buyer shall reasonably request, and will immediately hand to Buyer or its representatives for review its stock book, minute book, and copies of all retirement plans, employment agreements, leases, contracts with suppliers, and other contractor or documents to which it is a party.

11. Warranties. The Purchase Agreement will contain the warranties by Seller, including without limitation the following:

a. Warranties relating to the organization and good standing of Seller.

b. Warranties as to the accuracy of the financial statements of Seller provided to Buyer.

c. Warranties against any litigation or liabilities, including tax liabilities for prior years, other than those items disclosed to Buyer.

d. Warranties that all contracts, leases, and other agreements of Seller, if any, have been disclosed.

e. Warranties that Seller has good title to the assets, unencumbered by any liens except those disclosed.

f. Warranties that no brokerage commission will be due as a result of this transaction.

g. Warranties that the operation of all the assets will be in full compliance with all applicable federal, state, and local statutes, ordinances, and regulations.

12. Covenant Not to Compete. Seller and , for themselves and any of their affiliates, will agree not to compete with Buyer in for a period of years commencing on the Closing Date. As consideration for this agreement not to compete, Buyer will pay $ per month for 60 months, payable on the day of each month commencing , _____.

13. [Individual's] Employment. After the Closing Date, will work for Buyer at an annual salary of $ until either [he] [she] or Buyer desires to terminate such employment.

14. Negotiations With Others. Until , , Seller will not offer the assets to, entertain offers for the assets Seller will not offer the assets to, entertain offers for the assets from, negotiate for the sale of the assets to, or make information about the assets available to, any third party.

It is understood that this letter sets forth an agreement in principle only, is not binding on the parties hereto, and may not be relied upon as the basis for a contract by estoppel; provided that the parties intend that sections 10 and 14 will be enforceable until . With the exceptions of sections 10 and 14, it is understood that no party shall be bound until a Purchase Agreement has been duly executed and delivered.

[Buyer]

BY:

Agreed to in principle:

[Seller]

By:

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What a Letter of Intent for Sale of Business Is and when it’s used

A Letter of Intent for Sale of Business (LOI) is a preliminary, written summary of the major terms under which a seller and a prospective buyer agree to negotiate a business sale. The LOI typically identifies the parties, purchase price range or structure, assets included or excluded, any deposit or exclusivity terms, a due diligence period, and the anticipated closing timetable. It frames negotiations, allocates key risks before a definitive purchase agreement is drafted, and often sets confidentiality and non-solicitation expectations while the parties perform due diligence.

Why using a clear LOI matters to both parties

A well-drafted LOI reduces ambiguity, preserves bargaining positions, and outlines procedure for due diligence and exclusivity. It signals intent without necessarily creating a final, binding purchase contract and helps identify issues that require negotiation in a purchase agreement.

Why using a clear LOI matters to both parties

Who typically prepares and reviews an LOI

Legal counsel commonly reviews LOIs to confirm which provisions are binding, to preserve negotiation flexibility, and to reduce post-signing disputes.

  • Seller representatives and shareholders preparing the company for sale and describing assets and liabilities to buyers.
  • Buyers and strategic acquirers setting price range, financing conditions, and due diligence scope before drafting definitive agreements.
  • Brokers and M&A advisors coordinating timelines, confidentiality, and exclusivity to manage multiple interested parties.

Typical signatories and their roles

Seller — Owner or CEO

The seller or an authorized representative signs to confirm intent to negotiate and to commit any stated exclusivity or deposit. Confirm corporate authority and board approvals where required by company bylaws or operating agreements.

Buyer — Authorized Representative

A buyer’s authorized officer or investment representative signs to acknowledge proposed terms and commence due diligence. Ensure signatory has binding authority to avoid later ratification issues.

Essential components to include in a professional LOI

A complete LOI focuses on the commercial terms and the conditional mechanics that lead to a binding purchase agreement. Include enough detail to guide negotiations while reserving definitive legal commitments for the purchase agreement.

Parties

Identify the exact legal names and entity types for seller and buyer, including state of formation and any parent company information relevant to closing authority.

Purchase Price

State the proposed total price and allocation (cash, stock, earnout). Include whether price is subject to adjustment after due diligence or post-closing working capital true-up.

Assets and Exclusions

Describe which assets, liabilities, contracts, intellectual property, and employees transfer; list material exclusions to avoid later dispute.

Payment Terms

Detail deposit or earnest money, escrow instructions, timing of payments, financing conditions, and any holdbacks or indemnity reserves.

Conditions and Timeline

Set the due diligence period, closing conditions, regulatory approvals, and an expected closing date or range to coordinate schedules.

Confidentiality & Exclusivity

Include confidentiality obligations and any exclusivity/no-shop period, specifying duration and remedies for breach or premature termination.

Required data fields commonly captured in an LOI

Seller name: Full legal name
Buyer name: Full legal name
Business EIN: Federal employer ID
Purchase price: Numeric currency
Assets included: Short list
Exclusivity term: Days or date range

Step-by-step: preparing and executing an LOI

Follow a standard sequence to minimize misunderstandings and to preserve leverage before the purchase agreement phase.

  • 01
    Draft Terms: Summarize price, assets, and main conditions.
  • 02
    Legal Review: Have counsel confirm binding vs nonbinding clauses.
  • 03
    Signatures: Obtain authorized signatures and dates.
  • 04
    Begin Due Diligence: Share requested documents under the confidentiality terms.

How to amend or revise an LOI during negotiations

Document revisions with dated amendments and clear sign-off to maintain an audit trail of evolving terms.

01

Prepare Amendment:

Draft concise amendment language summarizing changes.
02

Mark Effective Date:

State the date the amendment takes effect.
03

Initial Changes:

Require initials on changed pages where helpful.
04

Sign Revised LOI:

Obtain signatures from all original parties.
05

Record Version History:

Keep prior versions with timestamps.
06

Confirm Impact:

Note whether changes affect exclusivity or deposit.

Configuring an online LOI workflow

Set up fields and routing to mirror the signed-paper process and to preserve a complete audit trail.

Field Configuration
Effective Date MM/DD/YYYY required
Parties Legal names and emails
Purchase Price Numeric currency field
Signatures eSign fields with signer order

Digital signing and platform requirements

Ensure the chosen system supports ESIGN/UETA legal requirements, preserves a tamper-evident record, and stores an audit trail suitable for future dispute resolution or regulatory review.

  • File formats: PDF, DOCX supported
  • Integrations: Salesforce, NetSuite, Google Workspace
  • Authentication: Email, SMS, or advanced methods

Where to send or store the executed LOI

After execution, route signed copies to all parties and store a master copy in a secure repository with access controls.

  • Buyer counsel: Receives fully executed LOI
  • Seller counsel: Receives executed copies
  • Escrow or agent: Receives deposit instructions
  • Document repository: Central secure storage for audit trail

Common LOI timeframes and deadlines to set clearly

Specify measurable deadlines in the LOI to avoid misunderstandings about diligence, exclusivity, and closing expectations.

Exclusivity period:

Number of days the seller cannot solicit other offers

Due diligence window:

Days permitted for buyer investigation

Deposit release date:

When escrowed funds become refundable or forfeitable

Target closing date:

Anticipated closing day or date range

Offer expiration:

Date and time when LOI offer lapses

Key milestones from LOI to closing

Track milestones in order to coordinate counsel, financing, and regulatory clearances before final agreement and closing.

01

LOI signed

Parties agree on major commercial terms and begin exclusivity.

02

Due diligence

Buyer inspects financials, contracts, and operations within agreed window.

03

Definitive agreement

Purchase agreement negotiated and finalized after diligence.

04

Closing

Transfer of funds and assets per the purchase agreement.

Frequent drafting and negotiation pitfalls to avoid

  • Vague price mechanics: omitting adjustment formulas leads to disputes during post-closing reconciliations and working capital true-ups.
  • Unclear asset lists: failing to list excluded assets or assumed liabilities creates ambiguity about what transfers at closing.
  • Insufficient signatory authority: allowing unauthorized signees forces later ratification and can delay or void transactions.
  • Missing confidentiality terms: inadequate NDAs risk leakage of sensitive financial and customer data during due diligence.

Consequences of errors or improper LOI terms

Deposit forfeiture: Loss of earnest money
Breach claims: Contract liability exposure
Tax consequences: Incorrect reporting obligations
Deal collapse: Transaction failure costs
Confidentiality breach: Reputational and legal harm
Litigation risk: Time and expense of disputes

Practical scenarios showing how an LOI is used

Two common LOI use cases illustrate how terms guide negotiations and protect parties during diligence.

Private Equity Buyer

A buyer issues an LOI to reserve exclusivity while financing is arranged and diligence is completed.

  • The LOI sets a 60-day diligence window.
  • The result is a clearer negotiation path and an agreed timetable for drafting the definitive purchase agreement.

Owner-Operator Sale

An owner uses an LOI to document price and transition terms before engaging counsel for the purchase agreement.

  • The LOI includes a partial deposit.
  • This reduces the risk that one side will pursue multiple simultaneous buyers and clarifies employee transition expectations.

Comparing eSignature options for executing an LOI (signNow first)

Select an eSignature provider that supports secure PDFs, audit trails, and the compliance elements your industry requires; signNow is listed first for comparison.

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 trial, no card Varies by vendor Varies by vendor Varies by vendor Varies by vendor
Bulk Send Yes (premium) Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No
Envelope Cap No cap 100 envelopes/user/year Varies Varies Varies

Practical tips for accurate and efficient LOI completion

Adopt standardized steps to reduce errors, accelerate negotiations, and protect both parties’ interests.

Use clear, measurable language
Avoid ambiguous phrases like 'reasonable' without a defined standard. Specify amounts, dates, and numeric thresholds so parties share the same expectations and reduce post-signing disputes.
Reserve binding terms
Label confidentiality, exclusivity, or deposit clauses as binding if intended; otherwise clearly state that commercial terms are nonbinding to prevent accidental contractual obligations.
Coordinate counsel early
Engage legal counsel to review which LOI provisions should be binding and to confirm authority to sign, especially for corporate sellers requiring board or member approvals.
Preserve an audit trail
Use a secure eSignature platform that records signer identity, timestamps, and IP addresses and stores final signed PDFs with an attached certificate of completion.

Frequently asked questions about LOIs for business sales

Answers to common questions about enforceability, electronic signing, and next steps after LOI execution.


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