The buyer and seller may con­sider enter­ing into a let­ter of intent some time after they sign a con­fi­den­tial­ity agree­ment but before they sign a busi­ness pur­chase agree­ment. When the par­ties reach this point they can go ahead and sign a let­ter of intent or they can imme­di­ately start nego­ti­at­ing the busi­ness sale agreement.

Typ­i­cally the par­ties will choose to sign a non-binding let­ter of intent if: they don’t want to take their chances that one of the par­ties will change the basic terms; they want to exclu­sively nego­ti­ate a deal; or they want to cre­ate a moral oblig­a­tion to nego­ti­ate a deal in good faith. The let­ter of intent should be non-binding. Oth­er­wise it makes sense to just nego­ti­ate the final busi­ness sale agreement.

Be care­ful in how you word the let­ter. Oth­er­wise you might end up with a bind­ing agree­ment when you didn’t intend to have one. The let­ter can include things such as price, a list of assets to be pur­chased, how to han­dle lia­bil­i­ties, whether the par­ties will exclu­sively nego­ti­ate with each other, nego­ti­a­tion sched­ules, fur­ther inves­ti­ga­tions, and what­ever else the par­ties want to include so long as you don’t include too many details to make it a bind­ing agreement.