Business Purchase Letter of Intent Template

You've found a business you want to buy, and the owner is willing to talk. Before anyone spends money on accountants, lawyers, or a deep dive into the books, both sides need a clear picture of the deal – without being locked into it too early.

What Is a Business Purchase Letter of Intent?

A business purchase letter of intent (LOI) is a written outline of a proposed deal to buy a business. It records who is buying, what they're buying, what they plan to pay, and the conditions that must be met before the sale closes. It usually comes after early talks and before the formal purchase agreement.

Think of it as a roadmap rather than a contract. It lets both sides confirm they agree on the big points before they invest time and money in the details. ConsumerShield's template lays out each section in order, so you can focus on the terms rather than the formatting.

Why Buyers and Sellers Use One

An LOI gives both parties a chance to test the deal before committing to it. For buyers, it's a way to secure time to investigate the business without competition. For sellers, it shows the buyer is serious and organized.

It also brings deal-breakers to the surface early. If you and the seller can't agree on price, payment terms, or structure at this stage, it's better to learn that now than after weeks of costly review. Once both sides sign off on the core terms, those terms usually become the baseline for the final agreement, so reopening them later can strain trust.

What to Include in Your Letter

Every deal is different, but most letters of intent cover the same core points:

• Parties and business – the full legal names of the buyer, the seller, and the business being sold.
• Price and payment – the total price and how it will be paid, such as cash at closing, seller financing, or an earnout tied to future performance.
• Deal structure – whether you're buying the company's assets or the owner's ownership interest.
• Due diligence – how long the buyer has to review records and what the seller must share.
• Exclusivity – a set period when the seller agrees not to negotiate with other buyers.
• Confidentiality – a promise to keep deal terms and shared information private.
• Conditions to closing – items like financing approval, landlord consent, or a satisfactory review.
• Deposit – if one is paid, who holds it and when it's refunded.
• Timeline and expiration – a target closing date and when the letter ends if no deal is signed.

The choice between an asset purchase and a stock purchase deserves early thought. Buyers often prefer asset deals because they can pick which assets and debts to take on, while sellers often prefer selling their ownership interest. Structure also affects taxes. In an asset sale, both sides generally report how the price is split among asset types on IRS Form 8594, so it may help to raise the price allocation in the LOI.

Binding vs. Non-Binding Terms

This is where many LOIs go wrong. Most of the letter – the price, structure, and closing conditions – is typically non-binding. That means neither side is forced to complete the sale just because they signed.

A few clauses, however, are usually meant to bind from the day of signing. These often include confidentiality, exclusivity, who pays which expenses, governing law, and the rules for ending the letter. Your LOI should state clearly which sections bind and which don't.

If it doesn't, a court may read the whole document as a binding promise to buy, or refuse to enforce the protections you meant to keep. Courts often look at both the wording and how the parties behaved, and the rules vary by state.

Common Mistakes to Avoid

• Making the entire letter binding, which can hold you to a price before you've checked the business.
• Skipping exclusivity, which leaves the seller free to use your offer as leverage with other buyers.
• Writing vague due diligence terms with no set time frame or clear access to records.
• Leaving out a clear right to walk away if the review turns up serious problems.
• Ignoring the transition, such as how the seller will run the business until closing.
• Not naming who is actually buying, especially if you plan to form a new company for the purchase.

What Happens After You Sign

Signing the LOI starts the real work. The buyer reviews finances, contracts, tax records, and legal issues. Meanwhile, the parties draft the definitive purchase agreement, which adds the seller's detailed promises, protections for the buyer, and the closing steps. Consents from landlords, lenders, or key customers may also be needed, and they often take longer than expected.

If you're still deciding whether an existing business is the right move, the SBA's guide to buying a business covers valuation and what to check before you commit.

A clear, well-organized letter sets the tone for the rest of the deal and helps both sides reach closing with fewer surprises. Working on a different kind of deal, such as a lease or a joint venture? Explore more letter of intent templates on ConsumerShield.