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Home Q&A Forum What is the purpose of a letter of intent?

Business Contracts

Letter of Intent


Asked on Oct 6, 2022

What is the purpose of a letter of intent?

I am buying a small business and have read I should put a letter of intent in place. I see they can be binding and non-binding. Why do I need to send a letter of intent? What is the benefit for the buyer?

1 Attorney answer


Business Contracts


Answered 475 days ago

Donya G.

ContractsCounsel verified

Business Lawyer
Licensed in Connecticut, New York
Free Consultation

A letter of intent establishes the initial negotiations of the parties; they are typically non binding. The LOI sets out what the parties should expect the agreement would look like, so that everyone is on the same page. For the buyer, it tells the seller what they want; and while no binding, it should only include terms that the parties agree upon. Those terms will be used in the Asset Purchase Agreement (APA) or Purchase and Sale Agreement (PSA) which is binding. As an attorney that focuses on the purchase and sale of businesses, I can assist you with the LOI as well as the documents required for purchasing the business and closing the deal. Donya Gordon

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