Glossary
LOI — Letter of Intent
On this page4 sections
What it is
An LOI is a short document both sides sign to fix the main terms — before anyone spends real money on lawyers and diligence. Most LOIs are non-binding except for specific clauses (exclusivity, confidentiality, expense responsibility) which are binding.
What to include
- Purchase price. Total consideration, broken into cash at close, seller financing, and any earnout.
- Deal structure. Asset purchase or entity purchase.
- Allocation of purchase price. How the price is allocated among assets (with tax consequences — review with a CPA).
- Closing timeline. Target close date and key milestones.
- Exclusivity period. The window during which the seller cannot negotiate with other buyers. Commonly proposed at one to three months and always negotiable — ask for enough time to complete the diligence you actually intend to do, because running out means renegotiating from a weaker position.
- Diligence period. The window for the buyer to complete diligence. Set it from the work the specific deal needs — a licensed trade, a QoE or a lease assignment each add time — rather than from a standard figure.
- What the seller will deliver during diligence. Financial statements, tax returns, contracts, leases, licenses, etc.
- Confidentiality. Reinforces the NDA signed earlier.
- Expense responsibility. Who pays for what if the deal doesn't close.
- Binding clauses. Explicitly identify which clauses are binding (typically exclusivity, confidentiality, expense responsibility) and which are non-binding (everything else).
LOI vs purchase agreement
The LOI is the framework; the purchase agreement (Asset Purchase Agreement or Equity Purchase Agreement) is the binding legal document that closes the deal. Don't try to make the LOI do the work of the purchase agreement — it's a term sheet, not a contract.
New York-specific notes
- SLA license transfer timeline. For liquor store and restaurant acquisitions, the NYS Liquor Authority (SLA) license transfer can take 4–6 months. Build this into your LOI's closing timeline — don't sign a 30-day diligence window if the SLA transfer will take 6 months.
- Bulk-sale notice timeline. The NYS Department of Taxation and Finance bulk-sale / successor-liability process has its own timeline. Build it into your LOI.
- Article 28 facility transfer. For medical practice acquisitions involving a NYS DOH Article 28 facility license, the transfer timeline can be 60–180+ days. Build it in.
- NYC lease assignment consent. NYC commercial leases typically require landlord consent to assign. Build landlord consent into your LOI as a contingency.
The full guide: The letter of intent, clause by clause.
Frequently asked questions
Is a letter of intent binding?
Mostly not, and deliberately so. Specific clauses usually are binding, typically exclusivity, confidentiality and who pays costs. The commercial terms are not. That is the point: it fixes the shape of the deal cheaply, before anyone spends on lawyers and diligence.
What should the LOI say about price?
State the basis, not just the number. 'Based on SDE of $X as represented' gives you a stated foundation, so if the foundation turns out not to hold, the consequence follows from the document rather than from your say-so. It is the single most useful sentence in the whole letter.
What do people leave out and regret?
The adjustment mechanisms. Say in the LOI that diligence findings may be addressed through price adjustment, holdback, escrow or specific indemnity. You are not naming a number, you are establishing that this is normal process rather than something sprung late.
Educational only — not legal, tax, lending, or investment advice. Confirm specific rules, rates, and forms with the relevant New York State agency, attorney, CPA, lender, or insurer before acting. See the editorial policy and methodology for how sourcing and review work.