Corner Office

Corner Office - Available Now

San Francisco
(Financial District), CA

100 Pine Street Suite 1250
San Francisco, CA 94111

by Barbara Beauregard
10/10/2014 11:26:46 AM

Using the LOI in Your Small Business Deals


Letters of Intent or LOIs are used for a variety of purposes. Companies use them when they are going to buy or sell a company. Agencies use them to define scope of work and term information. Some school applications, especially graduate school applications, require LOIs as part of the application process.

The goal of an LOI is to provide adequate information on the scope of work and to persuade the receiving party into agreeing to the major terms of the deal.

When to Use an LOI

The purpose of an LOI is not to be the final agreement. It’s generally an interim agreement that lays out the major components of or what actions will be taken in a future deal. An LOI is generally considered a “pre-contract” expressing the intent of the contract and shows that both parties are interested in reaching a final deal. If both parties agree to the LOI, the final contract is usually just adding the legal language.

While LOIs are not required for deals, they act almost like a memo, laying out in writing what both parties discussed. The LOI establishes the core details of the deal. If both parties agree to these, then it’s easier to expedite the final contract.

For parties that may be subject to sensitive data, LOIs often also contain non-disclosure agreements (NDAs). NDAs keep parties from sharing sensitive data with other third parties. This could be extremely important for clients or potential buyers and sellers.

What’s in an LOI

LOI components will really depend on the type of business. For business sales, components include:

  • Total Purchase Price
  • Terms
  • Buyer and Seller
  • Method of Payment
  • Closing Date
  • Conditions of Closing
  • Other conditions

For an agency, items may include:

  • LOI Effective Date
  • Terms
  • Description of Services
  • Goals
  • Proposed Services
  • Service Terms
  • Payment

All LOIs should have a place for signatures, date and title and should be signed by both parties. Since it isn’t a binding agreement, an LOI usually doesn’t need to be notarized unless both parties require it.

Who Should Use an LOI

Nearly any type of business can use an LOI as a solid, good faith handshake. Wording will be different based on the business. For example, a small mom-and-pop grocery store selling their business to a larger retail store will have different requirements than a contractor requiring an LOI to start work on a client’s website.

LOIs are useful for getting approval on the major details of the deal before the final negotiations begin. LOIs show that both sides are really ready to move forward and are taking the deal and its outcome seriously. 

Related

Additional Resources to Help Grow your Small Business

White Paper

How Mail Services Help Entrepreneurs Succeed

In today's mobile economy, digital entrepreneurs often work from varying locations. While this can help save money and increase agility, it comes with one big drawback:

Read More >
White Paper

Virtual Assistants Provide a Competitive Edge

Countless small business owners rely on remote assistants or offsite receptionists to help with critical organizational duties. While some are content to offload simple tasks to self-employed, stay-at-home support people, others demand more comprehensive services...NULL

Read More >
White Paper

Virtual Assistants & Remote Assistants: A Comparison

While the traditional virtual assistant is likely to work from home, an executive-level virtual assistant is part of a greater brick-and-mortar presence. This fundamental difference opens the door for extensive training opportunities that broaden the professional's support capabilities.

Read More >
White Paper

Overview of Virtual Offices, Executive Suites and Co-Working Spaces

Work has changed. In an age of instant communication, cloud-based applications, and workplace versatility, the era of the traditional office culture has come to an end. Providers of virtual offices, executive suites and co-working spaces have effectively liberated the nation’s work culture, adding dynamic and energizing new choices...

Read More >
White Paper

Part 1 of 4: Introducing the SBA

For entrepreneurs and small business owners, navigating the tricky terrain of creating a sound business plan, forecasting for growth and developing an operative growth strategy can be a major challenge. Fortunately, American entrepreneurs and operators have access to one of the most effective resources in the worldwide market...

Read More >
White Paper

Part 2 of 4: Starting a Small Business

Navigating the complex terrain of creating a sound business plan, forecasting for growth and developing an operative growth strategy can be a challenge for entrepreneurs and small business owners. Fortunately, American entrepreneurs have access to one of the most effective resources in the world via the Small Business Administration (SBA).
... Click to read more

Read More >
White Paper

Part 3 of 4: Managing a Small Business

Congratulations! You have gotten your small business up and running. Now what? This part of our four-part series on leveraging the Small Business Administration to help you launch and manage a small business will focus on the operational aspects of running a business. Whether you need leadership strategies, day-to-day decision making skills
... Click to read more

Read More >
White Paper

Part 4 of 4: Marketing, Sales and Contracting

Understanding marketing and sales as well as the technical complexity of our Internet-driven society gives entrepreneurs a distinct advantage over the competition. This final segment of our four-part report will take a deeper dive into the logistics and philosophy of marketing and sales and their impact on your business success.
... Click to read more

Read More >
White Paper

DIY Marketing Tools

If a business isn’t marketing, its potential customers are not finding it. Small to medium size businesses often struggle with spending hundreds of thousands of dollars on marketing. New DIY marketing tools, however, have eliminated the need to spend astronomical amounts on online and traditional marketing. These tools
... Click to read more

Read More >
White Paper

Virtual Office for Legal Professionals

Law firms (large and small) and solo legal practitioners alike can use virtual office services and spaces to run their entire legal operations or as a supplement to a home office or traditional brick-and-mortar offices. Virtual office services can be particularly useful during trial preparation
... Click to read more

Read More >
White Paper

Finance & Tax Professionals

Finance and tax professionals, whether they work solo or as part of a larger firm, can use virtual office spaces and services to stay on top of their workloads, especially during the busy tax season. Professional virtual office spaces can be particularly useful when back-to-back client meetings are necessary...

Read More >
White Paper

Traveling Entrepreneur

As business people and entrepreneurs continually strive to grow their business, doing so frequently involves traveling around the country to attend networking or tradeshow events, meeting clients and prospects on their own turf, and getting some face-time with colleagues, contractors or employees who may operate in a remote location. Preparation
... Click to read more

Read More >
White Paper

Virtual Office Eguide

Have you ever wondered why some small businesses are successful and others are not and what do these successful companies do to gain an edge over their competition? Through our years of experience
... Click to read more

Read More >

Additional Intelligent Office locations near San Francisco, CA