Legal Documents You Need to Exit Your LLC
Whether you’re selling your LLC, stepping away as a member, or shutting the business down entirely, you’ll need the right legal documents to exit...
6 min read
When you’re selling your LLC, the Letter of Intent (LOI) is often the first formal step in the negotiation process. While it’s not the final contract, it’s an essential tool for getting you and the buyer on the same page before lawyers draft the purchase agreement.
Legal GPS Pro
Protect your business with our complete legal subscription service, designed by top startup attorneys.
- ✅ Complete Legal Toolkit
- ✅ 100+ Editable Contracts
- ✅ Affordable Legal Guidance
- ✅ Custom Legal Status Report
An LOI helps prevent misunderstandings, outlines key terms, and gives both sides the confidence to move forward. Whether you’re selling to a competitor, an employee, or an outside investor, knowing how—and when—to use an LOI can make the entire deal go more smoothly.
1. What Is a Letter of Intent (LOI)?
A Letter of Intent is a non-binding agreement that outlines the key business terms of your deal before the legal documents are created. Think of it as a handshake in writing—it shows both sides are serious and lays out the framework for due diligence and the final purchase contract.
It’s typically used in deals involving:
- Full sale of your LLC (either through asset sale or equity sale)
- Sale of a partial ownership interest
- Mergers or acquisitions involving strategic buyers
The LOI typically includes high-level details like price, deal structure, and closing timeline. While it’s not legally binding in most cases, it can contain enforceable provisions (like confidentiality or exclusivity), so it’s still a document that deserves serious attention.
It also serves a practical purpose: it gets key deal points on the table before legal costs rack up. By aligning early, both parties can move forward with more confidence and fewer surprises.
2. When to Use an LOI in an LLC Sale
The ideal time to introduce a Letter of Intent is after you’ve had serious preliminary discussions with a potential buyer but before attorneys begin drafting the formal purchase agreement. If the buyer has reviewed your basic financials, expressed clear interest, and you're aligned on a potential price range or deal structure, that’s your cue to move forward with an LOI.
Think of it as a momentum-builder. You’re capturing mutual interest and committing to move forward—without yet committing to the full deal.
Common Scenarios Where an LOI Makes Sense
- You’ve received a verbal offer but want to clarify key terms in writing.
- The buyer wants to conduct due diligence but needs exclusivity first.
- You want to formalize discussions before sharing confidential details.
- You’re working with multiple buyers and need to narrow down to the most serious.
An LOI helps both parties invest their time and resources more confidently. Buyers get some assurance they’re not wasting time, and sellers protect the negotiation process from stalling or veering off track.
Pro Tip – Don’t Skip the LOI—It Protects Momentum and Prevents Misunderstandings
Skipping the LOI might feel like you’re “saving time,” but it often leads to confusion, backtracking, and mismatched expectations later on. A short, clear LOI can save hours of legal negotiation and help uncover red flags before you go too far down the road with the wrong buyer.
3. What to Include in an LOI
A solid LOI doesn’t need to be long or overly formal—but it does need to cover the core terms of your deal. These are the points that, if left vague or unspoken, often derail negotiations later. The LOI should outline what’s being sold, how much it’s being sold for, how it will be paid, and under what general conditions the deal will move forward.
Here’s what to include:
Essential LOI Components
- Purchase Price or Valuation Range: Even if the final number may change, include the proposed amount or a working range. This anchors expectations early.
- Deal Structure: Clarify whether the buyer is purchasing assets or your membership interest. This impacts taxes, liabilities, and legal paperwork.
- Payment Terms: Will you be paid in a lump sum at closing? Through installments? Is there an earnout or seller financing involved? List the intended method and timing of payment.
- Transition Expectations: Will you stay on to train the new owner? For how long? Will that work be paid or unpaid? Include rough expectations to avoid mismatched assumptions.
- Timeline and Target Closing Date: Include proposed deadlines for due diligence, drafting the final agreement, and closing the deal.
- Contingencies: These are the “if this, then that” items. Common ones include:
- Buyer securing financing
- Satisfactory due diligence
- Approval from partners, landlords, or regulatory agencies
- Confidentiality and Exclusivity (if applicable): Buyers may want a period of exclusivity (you won’t negotiate with other buyers). You may want a confidentiality clause to protect sensitive business info. These are often binding, even if the rest of the LOI is not.
4. Is an LOI Legally Binding?
One of the most common questions sellers ask is, “If I sign this LOI, am I locked into the deal?” The answer: it depends on how it’s written.
Most LOIs are non-binding when it comes to the actual sale—meaning neither party is legally obligated to close the deal. However, many LOIs include some binding provisions, such as confidentiality, exclusivity, or dispute resolution clauses. If those sections are enforceable and violated, you could still face legal consequences.
Legal GPS Pro
Protect your business with our complete legal subscription service, designed by top startup attorneys.
- ✅ Complete Legal Toolkit
- ✅ 100+ Editable Contracts
- ✅ Affordable Legal Guidance
- ✅ Custom Legal Status Report
Which Terms Are Usually Binding?
- Confidentiality: You and the buyer agree not to share sensitive information disclosed during the negotiation.
- Exclusivity (“no-shop” clause): You agree not to solicit or accept offers from other buyers for a set period.
- Governing law and jurisdiction: Specifies which state’s laws apply and where disputes will be handled.
These sections are often enforced even if the deal doesn’t go through. Meanwhile, other sections—like price, deal structure, and timing—are typically labeled as non-binding expressions of intent.
Why Clarity Matters
Make sure your LOI clearly distinguishes which provisions are binding and which are not. Phrases like “non-binding except as stated herein” or bolded section headings marked “Binding” can help avoid misunderstandings.
Example – Seller Caught Off Guard by Enforceable Exclusivity Clause
Marcus signed an LOI with a buyer that included a 60-day exclusivity clause. Two weeks later, a better offer came in from another buyer. When Marcus tried to switch, the first buyer threatened legal action—because the exclusivity provision was binding. Even though the rest of the LOI wasn’t enforceable, that single clause boxed him in.
5. How to Use an LOI to Strengthen Your Position
The LOI isn’t just a procedural step—it’s a powerful negotiation tool. If used strategically, it can help you anchor key terms, spot red flags early, and shape the rest of the deal in your favor. Instead of just reacting to buyer demands, the LOI allows you to set the tone and control the pace.
Anchor the Deal With Your Preferred Terms
Want a cash sale instead of seller financing? Prefer an asset sale over an equity sale? Hoping to cap your post-sale involvement?This is your chance to put those preferences in writing early. By getting agreement in principle on the structure and key terms, you make it harder for a buyer to change those points later—especially after due diligence.
Create Urgency and Limit Distraction
A signed LOI helps you pause other conversations while focusing on one serious buyer. The exclusivity period gives you breathing room to work through details without worrying about competing offers—and lets the buyer know you’re not wasting time.
Spot Red Flags Before Legal Costs Pile Up
If a buyer is vague, hesitant, or constantly revising simple LOI terms, that’s a warning sign. Better to learn that during LOI discussions—before you spend thousands on attorney fees or share your most sensitive business data.
Pro Tip – Use the LOI as Leverage to Control the Negotiation Pace
Buyers sometimes drag their feet after an initial verbal offer. A clear, well-drafted LOI helps turn interest into commitment and keeps the deal moving on your timeline, not theirs.
6. When to Involve a Lawyer
Although an LOI is often less formal than a full purchase agreement, that doesn’t mean you should sign it without legal review. In fact, this is one of the most important moments to involve your attorney—because decisions made in the LOI can shape the rest of the deal.
Bring in a Lawyer Before You Sign
A business attorney can help you:
- Spot enforceable clauses that could lock you into exclusivity or limit your ability to negotiate with others
- Clarify language so the LOI reflects your true intent
- Align the LOI with your operating agreement and state LLC laws
- Anticipate tax or liability implications tied to the deal structure
Even if the buyer provides a “standard” LOI, there’s no such thing as a one-size-fits-all agreement. A lawyer can help you tailor it to your specific goals and avoid unintended consequences.
Pro Tip – Don’t Wait Until the Purchase Agreement
Sellers sometimes assume they can fix any issues in the final contract—but by then, the buyer may consider certain terms already “agreed upon” in the LOI. That makes it much harder to push back later without jeopardizing the deal.
Getting your lawyer involved early helps you start strong and negotiate from a place of confidence.
Conclusion
A Letter of Intent isn’t just a formality—it’s a strategic tool that shapes your entire LLC sale. Done right, it clarifies expectations, builds momentum, and sets the foundation for a smoother, faster, and more successful deal.
From outlining the price and structure to protecting confidentiality and exclusivity, the LOI helps both sides commit to the process without committing to the final contract just yet. And while most of the LOI is non-binding, certain provisions can carry legal weight—so clarity and legal review are essential.
Don’t skip the LOI. Use it to position your terms, test buyer seriousness, and uncover issues early—before the heavy legal and financial work begins. With the right approach, your LOI becomes more than a placeholder—it becomes a powerful first step toward a clean and profitable exit.
Do you need a lawyer for your business?
The biggest question now is, "Do you need a lawyer for your business?” For most businesses and in most cases, you don't need a lawyer to start your business. Instead, many business owners rely on Legal GPS Pro to help with legal issues.
Legal GPS Pro is your All-In-One Legal Toolkit for Businesses. Developed by top startup attorneys, Pro gives you access to 100+ expertly crafted templates including operating agreements, NDAs, and service agreements, and an interactive platform. All designed to protect your company and set it up for lasting success.
Legal GPS Pro
Protect your business with our complete legal subscription service, designed by top startup attorneys.
- ✅ Complete Legal Toolkit
- ✅ 100+ Editable Contracts
- ✅ Affordable Legal Guidance
- ✅ Custom Legal Status Report
Selling Your LLC to a Competitor: Pros and Cons
Selling your LLC to a competitor can be one of the fastest and most lucrative exit strategies, but it comes with unique risks. Competitors already...
Negotiating an LLC Sale Like a Pro
Selling your LLC is about more than just finding a buyer—it’s about negotiating the right deal. From the initial conversation to the final contract,...