Letter of Intent in an Arizona Business Sale: the full guide

An LOI is the term sheet. Price. How the deal is structured. Deposit. How long diligence lasts. What happens if financing falls through. Those are the lines I walk Arizona sellers through before anyone signs.

I am a broker. This page is education, not legal advice. Your attorney drafts the paper. I do not publish sample legal forms.

Structure is its own conversation. An asset sale and a stock sale change tax, liability, and what actually transfers. More on that is on asset vs stock sale in Arizona.

The worksheet that starts the price conversation is Value My Business.

Most commercial terms stay open after the LOI. Price can still move. Structure can still change. Diligence findings rewrite numbers.

Some pieces can be binding. Confidentiality. Exclusivity. A deposit. A break fee. I will not tell you an LOI is always non-binding. I will not tell you it is always binding. Your counsel reads the draft in front of you and tells you which sentences lock you in.

A long exclusive with a buyer who cannot close parks the file. Other buyers go cold. You sit. Months go by. That is the risk I flag first.

The exclusive should be short enough that a real buyer can finish diligence and a weak buyer cannot sit on the listing. Financing contingencies belong on the same page. If the buyer needs a loan they have not started, a long exclusive is a gift to them and a tax on you.

Diligence is when the buyer rebuilds your numbers. The landlord is asked for consent. A liquor or other license transfer is mapped. Those clocks start after the framework is in place. They do not start on listing day.

Prep the package early. See due diligence for Arizona sellers.

The clocks after an LOI sit on how long a sale takes in Arizona.

How I run the rest of a listing is on Sell My Business.

Sellers treat a signed LOI as the finish line. It is the sketch. The purchase agreement is drafted after diligence, when the buyer has read the tax returns, the lease and the customer list, and both attorneys now know things nobody knew at LOI. Some terms you agreed to in a sentence come back as pages. That is normal, and I tell every seller to expect it.

The LOI says the price. The purchase agreement says how the price can move. A working capital target is one sentence in an LOI. In the agreement the buyer's accountant decides which accounts count, how inventory is valued, and what happens when closing working capital misses the target. A dollar-for-dollar true-up and a band around the target are very different outcomes for your check.

Indemnity works the same way. The LOI says the seller stands behind the representations. The agreement sets a cap, a basket below which small claims do not count, how long each representation survives, and whether part of the price sits in escrow to secure it. Which items get a lower cap, and whether the holdback comes back on a schedule, are the lines your attorney fights over.

The non-compete grows the same way. “Seller will not compete for a period of years” turns into geography, scope, and separate customer and employee non-solicitation clauses. The representations turn into a disclosure schedule you have to fill in line by line, with your attorney narrowing the ones you cannot stand behind.

A few things should never sit loose in an LOI: an earnout where the buyer runs the business and sets the number, a seller note with a default the buyer can trigger, a consulting role with no fee or term, and a closing conditioned on a landlord or franchisor consent with no way out if consent never comes. I flag these when the LOI lands. The paper that fixes them is your attorney's work, and it goes faster when counsel is in the room at LOI. More on that stage is on the purchase agreement in an Arizona business sale.

I keep terms tied to market reality. I screen whether the buyer can close. Counsel drafts and advises on the paper. Those are different jobs.

If a broker hands you a form LOI and tells you to sign it tonight, get your own attorney on the phone. I do not fill in your LOI. I do not replace counsel.