Letter of Intent (LOI): What Is It & Why Do I Need One?
When you’re getting ready for a big business deal, like buying or selling a dental practice, you might feel a mix of emotions – excitement, nervousness, pride, fear, and more. But amid all these feelings, one important question stands out: Where do you start?
Usually, business deals begin with something called a letter of intent, or LOI for short. This is a document that shows one party’s initial commitment to doing business with another and outlines the main terms of the proposed deal.
How do you make the best use of an LOI?
Think of it as a way to connect your desire to buy a healthcare practice with the formal contract you’ll eventually sign. It’s like making an offer and putting the basic terms on the table for the seller to consider.
People who are serious about buying a practice often use an LOI. It’s the first step and is based on information provided by the seller or their broker.
In simple terms, you use an LOI before you have a final purchase agreement. You can also work out all the other details of the contract by using the LOI as a starting point.
How Do You Write an LOI?
It’s usually a short document, typically no more than three pages. But what you include can vary depending on who’s writing it. Usually, the broker for the selling doctor writes the LOI, but sometimes the buyer may write it for both parties to review and sign.
No matter who writes it, a good Letter of Intent should have:
- A beginning part that explains what it’s for.
- Names and contact info for the buyer, seller, and their brokers.
- Details about the practice you’re buying, like where it is, what’s included, and what’s not.
- The main terms of your offer, like the price, financing terms, and when things need to happen.
- Some disclaimers to explain when the agreement might not work out (even though LOIs are usually not binding at first).
- The date when the LOI should be accepted.
- A closing statement to sum things up and remind everyone that the LOI isn’t a contract and isn’t binding.
- Signatures from both parties to show they agree.
What comes Next?
Once the Letter of Intent is signed, the buyer needs to do some research, get loan approval, and negotiate a final purchase agreement with the seller. It’s a good idea to get advice from experienced lawyers to make sure everything goes smoothly. You can contact our office to find lawyers who can help you make sure your LOI fits your goals for the practice transition. Contact one of our attorneys at Dike Law Group and schedule a meeting so we can discuss at dorismeet.com.
