If you are considering buying a dental practice, there is a good chance you will draft a letter of intent (LOI) at some point. However, if this is your first time setting up your own business, you might not be clear on LOI’s concept and how it can help you. It is basically a legal document or agreement that outlines the terms of the purchase.
It is important to fully understand what you and the other party expect from the business relationship. An LOI also ensures that there are lesser chances of conflict down the line. It is recommended to hire a dental attorney and have them draft the LOI to ensure your interests remain protected and comply with the laws. Click here to learn how.
What is a letter of intent (LOI), and what is its purpose in a dental practice?
A letter of intent (LOI) is an agreement between two parties who intend to participate in business together. The letter outlines the terms of the future agreement and records initial negotiations and discussions.
In the dental business world, a letter of intent is used to outline the broad strokes of the deal before discussing the finer details. If the two parties cannot agree on the key terms of the letter, then there is almost no probability that the parties could work together. This saves time because parties can understand whether they are on the same page before making things official.
Serious prospective buyers usually use an LOI before making a purchase. The letter works as an initial offer and is prepared on the information given by the seller or broker.
What should be included in a letter of intent (LOI)?
A letter of intent should be precise, short, and no more than three pages. The information inside may vary depending on who writes it. In some cases, the broker for the seller writes it, while in others, the buyer writes it for the broker and seller to review.
A basic letter of intent should include the following:
- Purpose statement.
- Information of the parties and broker involved.
- Description of the property being purchased and assets and liabilities included.
- Purchase offer details, such as price or loan terms.
- Circumstances in which either party may terminate or void the agreement.
- Date of acceptance of the LOI.
- A closing statement.
- Signatures from both parties.
By making each other aware of their intentions through the LOI, both parties do their part in increasing the likelihood of a successful transaction.