Deal guide

Letter of intent for buying a business in New York

A useful LOI is not a ceremonial offer letter. It is a decision map: what you think you are buying, how the economics work, what must be proved, who must consent, and which conditions let either party stop before the definitive agreement.

Last updated: July 21, 2026. Educational only—not legal, tax, lending, or investment advice. Use experienced New York transaction counsel.

What the LOI should accomplish

The SBA lists an LOI among the common documents used when buying an existing business ^[1] . For the buyer, its practical job is to align the deal before expensive diligence and legal drafting.

1. Define the assets, equity, or business being acquired.
2. Translate the headline price into complete economics.
3. Identify the assumptions behind the price.
4. Set access, diligence, financing, consent, and timing conditions.
5. State which provisions the parties intend to be binding or non-binding.

An LOI cannot eliminate uncertainty. It can make uncertainty visible and allocate who must resolve it.

1. Define the transaction perimeter

State the intended asset or equity structure, exact buyer and seller entities, included locations, and excluded assets. The NYS Department of State entity database can help verify the seller's legal name and status ^[3] ; counsel should also obtain the appropriate lien searches.

For an asset deal, identify included contracts, inventory, equipment, intellectual property, phone numbers, domains, records, deposits, prepaid items, receivables, and permits. Identify excluded cash, debt, liabilities, and personal assets. For an equity deal, specify assumed indebtedness, cash treatment, intercompany balances, and any seller obligations that must be cleared.

2. Write the full economic equation

Term	Questions the LOI should answer
Headline price	Cash-free/debt-free? Includes real estate or inventory? Subject to which adjustments?
Cash at closing	How much, from which financing sources, and after which payoffs?
Seller note	Principal, interest, amortization, maturity, standby, security, subordination, and offset rights?
Earnout or holdback	Metric, accounting policy, measurement period, control rights, disputes, acceleration, and cap?
Working capital	Included categories, target, measurement rules, example calculation, and post-close true-up?
Inventory	Included in price or added at cost? How are obsolete, consigned, damaged, or work-in-process items treated?

Avoid phrases such as "normal working capital" without a schedule and sample calculation. If buyer and seller cannot compute the same closing number from the LOI, the economics are not aligned.

3. Attach price to explicit assumptions

State the financial period and normalized earnings on which the offer relies, plus the key add-backs and replacement expenses. Identify assumptions for customer retention, seller involvement, capital expenditure, inventory, debt, cash, and working capital.

This does not turn an indication into a guarantee. It gives the parties a rational basis for revisiting price if verified facts differ materially. Use the quality-of-earnings guide to define the financial proof.

4. Convert diligence into decision gates

A buyer should preserve broad access while naming the deal-specific gates. Examples:

• tax returns and seller-authorized transcripts reconcile to financial statements;
• normalized earnings and working capital are acceptable after QoE;
• top customers, contracts, employees, and suppliers meet retention conditions;
• licenses, registrations, insurance, zoning, and permits can support the buyer's structure;
• environmental, property, equipment, cybersecurity, and litigation reviews are acceptable;
• no material adverse change occurs before closing.

Set the diligence period, when the clock starts, what a complete data room means, and extension rights if required information arrives late.

5. Make financing language match the real plan

If financing is required, state the condition and required cooperation: lender access, tax transcripts, appraisal, landlord or seller documents, life insurance if required, and timing. Avoid presenting a financed offer as unconditional unless the buyer truly can close without financing.

Address how seller financing interacts with senior debt and whether lender-required changes need seller consent. The LOI should not promise terms a lender has not approved.

6. List third-party consents and continuity steps

Typical examples include landlord consent, contract assignment, franchise approval, lender payoff, lien release, license or permit action, insurer confirmation, and change-of-control notices. Industry pages on this site show why these are deal-specific—for example, carrier registrations and pesticide-business registrations attach to particular legal and operational facts.

7. Put New York closing mechanics on the timeline

The Tax Department says a purchaser in a bulk sale should notify it at least 10 days before paying for or taking possession of business assets using Form AU-196.10 ^[2] . Have tax counsel determine applicability and coordinate the timing; do not wait until the day before closing.

Employee continuity also requires attention to workers' compensation, disability benefits, and Paid Family Leave. The Workers' Compensation Board provides the current employer guidance ^[4] . The definitive agreement and closing checklist—not the LOI alone—should implement these obligations.

8. Treat exclusivity as a priced resource

If the seller stops marketing the business, define the exclusivity period, buyer milestones, extensions, prohibited solicitation, fiduciary or legal exceptions counsel recommends, and what happens if the buyer misses a deadline. A long no-shop with no buyer milestones can create distrust; a short period with an incomplete data room can make diligence impossible.

9. Label binding and non-binding sections precisely

Many LOIs intend the business terms to be non-binding while confidentiality, exclusivity, access, publicity, expenses, governing law, and similar provisions may be binding. Labels are not magic; wording and conduct matter. Counsel should make the document internally consistent and explain what can create liability before either party signs.

A disciplined LOI sequence

1. Obtain enough initial information to build a defensible range and issue list.
2. Draft a one-page deal model before drafting prose.
3. Have tax, licensing, environmental, or lender specialists identify structure-sensitive issues.
4. Ask transaction counsel to prepare or revise the LOI.
5. Negotiate economics and proof conditions together.
6. Create the diligence request list and closing-condition tracker immediately after signature.

Where to go next

• Test the earnings assumption with the QoE guide.
• Run the full due-diligence checklist.
• Model acquisition capacity with the affordability calculator.
• See the end-to-end New York acquisition process.