What Business Owners Should Prepare Before a Letter of Intent

On Behalf of MacGregor Lyon

Quick Summary

A letter of intent can look preliminary, but it often shapes the direction of a sale, acquisition, or investment deal. Before signing, business owners should prepare their records, think through exclusivity and confidentiality, and identify the terms they are not ready to lock in. Early legal review can help prevent a fast-moving deal from creating avoidable leverage problems later.

A business owner can spend months building interest in a deal, then lose leverage in a single early document.

That often happens with a letter of intent. The parties are excited, the broad terms seem close enough, and everyone wants to keep momentum moving. Because the LOI is not usually the final purchase agreement, it can be treated like a rough draft.

That is where trouble starts.

In business transactions, a letter of intent can shape price discussions, due diligence timing, exclusivity, confidentiality, and expectations about what happens next. Even when much of the document is nonbinding, some provisions may still carry real consequences. For Atlanta business owners preparing for a sale, acquisition, or investment transaction, the better question is not just whether to sign an LOI. It is whether the business is actually ready for one.

Know What The LOI Is Supposed To Do

A letter of intent usually outlines the main business terms before the parties invest more time and money in full transaction documents. It can help both sides decide whether they are aligned enough to move forward.

Depending on the deal, an LOI may address purchase price or a valuation formula, whether the transaction is an asset deal or an equity deal, deposits or earnest money, confidentiality obligations, exclusivity periods, due diligence timing, financing conditions, closing targets, transition expectations, and which provisions are intended to be binding and which are not.

The risk is not that an LOI exists. The risk is signing one without understanding what it is setting in motion.

Get Your Records Ready Before Due Diligence Starts

If the other side signs an LOI and immediately asks for documents, disorganization can become part of the negotiation.

A buyer or investor who sees missing records, inconsistent ownership documents, or unclear contract terms may start asking harder questions. That can slow the deal, reduce trust, or lead to pressure on price and closing terms.

Before signing, business owners should review whether they can quickly produce key records such as financial statements, tax returns, major customer contracts, vendor agreements, employee and independent contractor agreements, lease documents, corporate governance records, ownership records, licenses and permits, and pending claims, disputes, or litigation history.

This is one reason outside general counsel can be valuable before a transaction gets deep into drafting. The goal is not just to collect paper. It is to spot issues early enough to decide how they should be handled.

For business owners reviewing related transaction documents, it may also help to understand how broader business law services can support deal preparation before negotiations harden.

Decide How Much Confidentiality And Exclusivity Make Sense

Confidentiality is often expected in a serious deal. Exclusivity deserves more caution.

If a seller agrees not to talk with other buyers for a period of time, or an investor expects a no-shop commitment, that can change the balance of the negotiation. Sometimes exclusivity is reasonable. Sometimes it gives away leverage too early.

Before agreeing to exclusivity, a business owner may want to think through questions like:

How long will the restriction last?

What exactly is prohibited during that period?

Does the other side have clear diligence deadlines?

Is there a realistic path to a purchase agreement, or just a request to tie up the opportunity?

A short exclusivity period with clear expectations may be manageable. A vague or one-sided restriction can be much harder to unwind once the process begins.

Identify The Terms You Are Not Ready To Promise

One of the most common LOI problems is false certainty.

A document can make it look like the parties have already resolved issues that are still unclear. That may create friction later, especially if one side treats the LOI as a roadmap and the other side thought it was only a starting point.

Before signing, business owners should identify the points they are not ready to commit to, such as valuation assumptions, financing structure, transition services after closing, employment or consulting expectations, timing for closing, treatment of debt or liabilities, and post-closing restrictions.

This can matter even more in owner-operated businesses. A buyer may assume the seller will stay involved for months after closing. The seller may expect a much shorter transition. If that gap is left unaddressed at the LOI stage, the disagreement may surface later when the parties have already spent time and money on the deal.

Do Not Leave Core Structural Issues For Later

Some issues are too important to push down the road with a casual promise to work them out later.

That can include questions such as:

Is the transaction structured as an asset sale or a stock sale?

Are key employees expected to remain?

Do customer or vendor contracts require consent before assignment?

Are there personal guarantees that need to be released?

Is there a lease that creates a separate negotiation problem?

Who is responsible for transaction expenses?

These are not minor cleanup points. They can affect control, liability, timing, and whether the deal can close on the terms the parties expect.

Business owners comparing transaction structures may also want to review MacGregor Lyon’s discussion of asset sale vs. stock sale issues as part of early planning.

Use The LOI To Create A Better Process

A useful LOI does more than summarize economics. It can help create a process both sides understand.

Depending on the transaction, that process may include a due diligence timeline, deadlines for document production, confidentiality rules, responsibility for drafting the next agreement, conditions that must be satisfied before closing, and a framework for follow-up negotiations.

That structure can reduce confusion and help the parties move more efficiently. It also gives a business owner a better chance to see where the real pressure points are before the final documents arrive.

For owners evaluating agreements before they sign, MacGregor Lyon also covers practical contract review issues through its contract review and business counsel services.

Why Early Legal Review Can Matter

By the time a full purchase agreement is circulating, leverage may already be shifting.

If the LOI set the wrong expectations, gave away exclusivity too broadly, or overlooked a structural issue, fixing the problem later can be harder and more expensive. Early legal review can help a business owner understand what should be clarified now, what can stay flexible, and what records need attention before diligence begins.

That is especially important when the lawyer’s role is not limited to marking up one document. In many transactions, the real value comes from helping the owner connect the paper to the business consequences.

The Bottom Line

A letter of intent may be an early-stage document, but it is often the first serious legal step in a transaction. Business owners should treat it that way.

Call Glen at (404) 688-5964 to schedule a free consultation.