Today’s post discusses an important early step when you are purchasing a business: drafting and negotiating a business purchase letter of intent. The process of drafting and negotiating a business purchase letter of intent generally follows the initial negotiation of the major business purchase terms. Those material terms—price, payment method, closing timing, and basic conditions to the sale—are generally negotiated directly between the parties on smaller business purchase and sale transactions. On larger transactions, the parties and their brokers and investment bankers negotiate those terms.

After you agree on what each party is going to do as part of the business purchase, one party (often the buyer) will distill those main business terms into a written document that is the business purchase letter of intent....

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