What to include in an LOI to buy a business, including terms that protect records

What an LOI to buy a business should cover

A letter of intent to buy a business should set out the price and how it is paid, the structure and what is being bought, the working capital and debt basis, diligence scope and access, exclusivity, the main closing conditions, the seller's transition role, and which provisions are binding. Most of an LOI is usually non-binding, while a few terms such as exclusivity and confidentiality usually bind; your counsel decides the split and writes it down.

The LOI is also the cheapest place to protect the business's records. After signing, the seller still controls every system until closing, and a cancelled subscription or a purge of old email cannot be reversed. A few sentences on records preservation protect the operating history you are paying for and keep later options open, including licensing that history.

Buyers will be writing plenty of these. McKinsey estimates that by 2035 about six million US small and medium-size businesses will face ownership transitions as baby boomers retire, and that more than one million of them are viable candidates for sale (McKinsey, The great ownership transfer).

The LOI checklist

Price and payment

• Headline price, or the valuation method plus the earnings measure and period it rests on.
• How the price is paid: cash at closing, seller note, earnout or equity rollover, with the key terms of each.
• Financing assumptions, and whether closing depends on obtaining financing.
• Cash-free, debt-free basis and how the normalized working capital target will be set.
• Any escrow or holdback, and what it secures.

Structure and what is included

• Asset purchase or equity purchase, and the buying entity.
• Included assets named explicitly: customer contracts, intellectual property, software accounts, domain names, phone numbers, social accounts, and the business records held in every system.
• Excluded assets and liabilities.
• Real estate and leases: purchase, new lease or assignment.

Diligence and access

• Length of the diligence period and what extends it.
• Scope: financial, quality of earnings, legal, tax, HR, IT and customer.
• Read-only access to finance, CRM, ticketing and file systems under the NDA, with a named contact for each.
• Access to key employees and, at an agreed stage, to key customers.

Exclusivity and conduct before closing

• No-shop period and the conditions for extending it.
• Ordinary-course covenant: the seller runs the business normally until closing.
• Records preservation: the seller keeps all systems running and subscriptions paid through closing, and does not delete, purge, or archive and cancel email, chat, file shares, CRM, accounting, ticketing or engineering history.
• Retention settings: no shortening of retention or auto-delete periods before closing.
• Administrator access: a current list of every system with its admin owner, and credentials handed over at closing.
• No data deals: the seller does not license, sell or share company data, including for AI training, before closing without the buyer's written consent, and discloses any existing data licenses.

Transition and people

• The seller's transition period, role and any consulting pay.
• Key employee retention plans, and who tells staff and when.
• Restrictive covenants such as non-competition and non-solicitation, which depend on state law and vary widely.

Conditions, timing and binding terms

• Main conditions: satisfactory diligence, a definitive agreement, financing, and third-party consents such as the landlord and key customers.
• Target dates for signing the definitive agreement and for closing.
• A clear statement of which provisions bind (often exclusivity, confidentiality, expenses and governing law) and which do not.

How to use the checklist results

Red flags in the seller's response

• Refusing read-only access to core systems while asking for a long exclusivity period.
• Recent cancellations of older tools, or a sudden clean-up of email and shared drives.
• Customer data held in systems the seller does not control, such as a client's own tenant.
• Reluctance to say whether any company data has been licensed or sold.
• Records that look as if they were produced after the fact to support the numbers.

The guide on how to read a CIM as a buyer covers the earlier step of spotting systems and records in marketing materials, and the AI roll-up due diligence checklist goes deeper on client-data rights once the LOI is signed. For the accounts themselves, see transferring the domain and seller-held accounts.

Why records terms matter once you own the business

For a searcher or individual buyer, intact history is operational insurance: it explains customer pricing, past disputes and how the work really gets done. It can also become an asset. A company with 50+ full-time employees at peak (contractors excluded), several years of documented operations and rights to its records may be able to license them through SourceX for a one-time payment while keeping ownership; such licenses are typically exclusive for AI training for an agreed term. After closing, you as owner or CEO are the sponsor who decides. The guide to buying a business with 50+ employees covers what else changes at that size, and who qualifies lists the full baseline.

Searchers also review many companies they never buy, often while screening for businesses that hold up as AI spreads. If you know the owner of a business you passed on, you can introduce it as a referral partner, sharing basic fit information only and never anything from the CIM or diligence. Partners earn 25% of the eligible platform fees SourceX collects from that company's licensing deals, capped at $100,000 per referred company, paid only after the buyer pays and SourceX receives its fee.

This is general information, not legal, tax or financial advice. Have your M&A counsel draft and review the LOI.

Next step

Add the four records terms to your LOI template before your next offer. If a business you passed on looks like a fit, register as a partner to make the introduction, or point the owner to sourcex.si/apply.