When buying or selling a business in Florida, one of the first formal steps in the transaction is the Letter of Intent (LOI). An LOI is a preliminary document that outlines the major terms of the deal before the parties invest significant time and resources in due diligence and formal contract drafting.
Understanding what an LOI is, what it should include, and which provisions are binding can save both buyers and sellers from costly misunderstandings down the road.
Is an LOI Binding?
Most LOI provisions are non-binding — meaning either party can walk away without legal consequences. However, certain clauses are typically drafted as binding, including confidentiality and exclusivity (no-shop) provisions. It is critical that the LOI clearly labels which provisions are binding and which are not.
10 Key Components of an LOI
- 1.Structure of the Deal — asset purchase vs. stock or membership interest purchase, and the reasons for the chosen structure
- 2.Purchase Price & Payment Terms — total consideration, earnest money deposit, payment method (cash, seller financing, earnout, etc.)
- 3.Description of Assets or Equity — what is included (and excluded) from the sale
- 4.Transaction Timeline — expected closing date, due diligence period, and any financing contingencies
- 5.Confidentiality Clause (binding) — protects both parties' sensitive information during negotiations
- 6.Exclusivity / No-Shop Clause (binding) — prevents the seller from negotiating with other buyers during the due diligence period
- 7.Due Diligence Access — what the buyer will review: financials, tax returns, contracts, leases, licenses, and corporate records
- 8.Conditions to Closing — due diligence completion, financing, landlord or franchisor consents, and license transfers
- 9.Binding vs. Non-Binding Provisions — clearly labeled to avoid confusion about which terms are enforceable
- 10.Governing Law — Florida law specified as the governing jurisdiction
Common LOI Mistakes
- –Using vague language that leads to disagreement about price or deal structure
- –Failing to distinguish which provisions are binding and which are not
- –Skipping legal counsel and relying on a generic template
- –Making commitments before completing basic due diligence
Why You Need a Florida Business Attorney
A well-drafted LOI sets the tone for the entire transaction. It prevents misunderstandings, protects confidential information, and gives both parties clarity on what they're agreeing to before significant time and money is invested.
Wheeler Legal assists Florida buyers and sellers through every stage of a business transaction — from the initial LOI through due diligence, purchase agreement drafting, and closing. Contact us before you sign an LOI to ensure your interests are protected from the start.