Non-binding LOI for the purchase of a privately held business
Not legal advice. This template is a general starting point, not a substitute for a lawyer. Contract, consumer-protection, licensing and tax rules vary by state and city. Have a local attorney review it before you use it.
[Date]
To: [Seller name(s)], owner(s) of [Company legal name] (the "Company")
This letter sets out the principal terms on which [Buyer legal name] (the "Buyer") proposes to acquire the Company. Except for the sections titled Confidentiality, Exclusivity, Expenses and Governing Law, this letter is not binding on either party; a binding obligation will arise only from a definitive purchase agreement signed by both parties.
[Asset purchase / Purchase of 100% of the equity] of the Company, free of debt and liens except as agreed.
| Total purchase price | $[____] |
|---|---|
| Cash at closing | $[____] |
| Seller note (principal, rate, term, security) | $[____] at [__]% over [__] years, secured by [____] |
| Earn-out (metric, target, period, maximum) | [____] |
| Rollover equity (if any) | [____] |
| Escrow / holdback | $[____] for [__] months |
The price assumes a normal level of net working capital of $[____] delivered at closing, with a dollar-for-dollar adjustment. Inventory at cost is [included / added at closing].
The parties will agree the allocation among asset classes (IRS Form 8594) before signing the definitive agreement.
Buyer will complete financial, legal, tax, licensing and operational diligence within [__] days of signing, including [quality of earnings review / lender requirements].
Buyer intends to finance the purchase with [cash / SBA 7(a) loan / bank loan / other]. [Closing is / is not] conditional on financing.
Seller will provide transition assistance for [__] months at [compensation]. Non-compete: [__] years within [territory], consistent with applicable state law.
[Treatment of employees; assignment of the premises lease subject to landlord consent; transfer or re-issuance of licenses and permits.]
For [__] days after signing, Seller will not solicit or negotiate other offers for the Company. (Binding.)
The terms of this letter and all information exchanged are confidential under the NDA dated [____]. (Binding.)
Each party pays its own costs. This letter is governed by the laws of [State]. (Binding.)
| Definitive agreement signed by | [Date] |
|---|---|
| Target closing date | [Date] |
Template from TradeExit Guide (tradeexitguide.com). Educational only. Have a transaction attorney and CPA review before use.
Free template from TradeExit Guide. Edit freely for your business.