What Is a Letter of Intent When Selling a Business in Florida?

If you’re selling your business in St. Augustine or anywhere in Florida, you’ll hear the term “Letter of Intent” early in the process. It sounds formal — and it is — but it’s also one of the most important documents you’ll sign before you ever get to closing day.

Here’s what it is, what it covers, and what to watch out for.

What Is a Letter of Intent (LOI)?

A Letter of Intent — sometimes called an LOI or a term sheet — is a non-binding agreement between a buyer and seller that outlines the basic terms of a proposed business sale. Think of it as the roadmap before the full contract is written.

The LOI comes after initial negotiations and before the formal Purchase Agreement. It signals that both sides are serious and want to move forward — while protecting the buyer’s right to do their homework (due diligence) before fully committing.

What Does an LOI Typically Include?

Every LOI is different, but most cover the same core elements:

• Purchase price — The proposed amount the buyer will pay
• Deal structure — Whether it’s an asset sale or stock sale
• Payment terms — Cash at close, seller financing, earnout provisions
• Due diligence period — How long the buyer has to review your financials, leases, and operations (typically 30–60 days)
• Exclusivity clause — Whether you agree to stop marketing the business while the buyer completes due diligence
• Deposit or earnest money — A good-faith payment held in escrow
• Closing timeline — Target date for finalizing the transaction
• Contingencies — Conditions that must be met for the deal to close (SBA financing approval, lease assignment, etc.)

Is an LOI Legally Binding?

Most of the LOI is non-binding — meaning either party can walk away before the Purchase Agreement is signed. However, certain provisions within the LOI are typically binding, including:

• Confidentiality — The buyer agrees not to share your business information
• Exclusivity — You agree not to negotiate with other buyers during due diligence
• Deposit terms — Rules around earnest money and what happens if either side backs out

This is why it’s critical to have an attorney review the LOI before you sign it. Even “non-binding” language can have real consequences.

Should I Negotiate the LOI?

Absolutely. The LOI sets the tone for everything that follows. Buyers often submit an initial LOI with favorable terms for themselves — it’s expected that you’ll push back.

Key areas sellers commonly negotiate:

• Price — Obviously. But also the structure of the price (cash vs. seller note vs. earnout)
• Exclusivity period — Keep it as short as possible (30 days is reasonable; 90 days is too long)
• Due diligence scope — Clarify exactly what the buyer is entitled to review
• Deposit size — More earnest money means a more committed buyer
• Contingencies — Fewer contingencies = more certainty for you as the seller

What Happens After the LOI Is Signed?

Once both sides sign the LOI, the buyer begins formal due diligence. This is when they’ll dig into your financials, tax returns, contracts, leases, customer lists, and operations. Your job is to be organized, responsive, and honest.

If due diligence goes smoothly, the attorneys draft the formal Purchase Agreement, and you move toward closing. If something unexpected comes up, the buyer may renegotiate — or walk away entirely.

Common LOI Mistakes Sellers Make

• Signing without having an attorney review it
• Agreeing to a long exclusivity period with a buyer who isn’t fully committed
• Accepting vague price language that gives the buyer room to reduce the offer later
• Not clarifying what happens to the deposit if the buyer backs out without cause

Working With a Business Broker

A good business broker will help you evaluate any LOI before you respond — identifying weak terms, comparing the offer to market norms, and coaching you through the negotiation. This is one of the most valuable things a broker does: protecting you at a critical moment when sellers often feel pressure to just say yes.

If you’re selling a business in St. Augustine or Northeast Florida and want help evaluating a letter of intent — or want to understand what a strong offer looks like before you get there — reach out. I’m happy to walk you through it.

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