A Letter of Intent (LOI) is often the first major step in buying or selling a business or dental practice. It marks the point where a potential buyer and seller move from casual discussions into serious negotiations.
For many dentists and small business owners, signing an LOI feels like a simple formality—a document that says, “We are interested in moving forward.” However, an LOI can significantly impact the rest of the transaction. The terms negotiated in the LOI often shape the final purchase agreement and determine whether the deal moves forward smoothly or becomes complicated later.
Whether you are a dentist looking to purchase your first practice or an owner preparing for a sale, understanding the purpose of an LOI and knowing what to negotiate before signing can protect your investment and your future.
At FIAT Law Firm, we help dentists and small business owners navigate practice acquisitions, sales, contracts, and business transitions. Below is what every dentist and business owner should know about Letters of Intent.
What Is a Letter of Intent?
A Letter of Intent is a document that summarizes the key terms of a proposed business transaction before the parties enter into a final purchase agreement.
In a dental practice acquisition, an LOI typically includes:
- Purchase price
- Assets being purchased
- Financing terms
- Transition period
- Seller’s involvement after closing
- Due diligence timeline
- Confidentiality obligations
- Exclusivity period
Think of an LOI as the roadmap for the transaction. It helps the buyer and seller confirm that they agree on the major terms before investing significant time and money into the final documents.
Is an LOI Legally Binding?
A common misconception is that an LOI is either completely binding or completely non-binding.
Most LOIs state that the parties are still negotiating and that the final purchase terms will only become binding after signing a definitive Purchase Agreement.
However, certain provisions may still be enforceable, such as:
Confidentiality
The buyer may receive sensitive information about the practice, including financial records and patient-related information. Confidentiality provisions protect that information.
Exclusivity
The seller may agree not to negotiate with other buyers for a specific period of time.
Transaction Expenses
The LOI may address who is responsible for legal, accounting, or other transaction costs.
Because some terms may have legal consequences, it is important to understand the document before signing.
What Should Dentists Review Before Signing an LOI?
1. Purchase Price and What Is Included
The purchase price is important, but the buyer should also understand exactly what they are purchasing.
The LOI should clearly address whether the sale includes:
- Dental equipment
- Patient records
- Office furniture
- Supplies
- Website and phone numbers
- Practice name
- Goodwill
A lower price does not always mean a better deal. The value of a dental practice depends on many factors beyond revenue.
2. Transition Period
A smooth transition is critical when buying a dental practice.
The LOI should address:
- How long the seller will remain involved
- Whether the seller will continue treating patients
- How patients will be introduced to the new owner
- Whether the seller will provide training or assistance
A well-planned transition helps maintain patient relationships and protect the value of the practice.
3. Due Diligence Period
Before closing, the buyer should have time to review important information about the practice.
This may include:
- Financial statements
- Tax returns
- Patient records
- Employee information
- Lease documents
- Equipment condition
- Existing contracts
A proper due diligence period allows the buyer to identify potential problems before becoming the owner.
4. Lease Terms
For many dental practices, the location is one of the most valuable assets.
Before signing an LOI, buyers should understand:
- Whether the lease can be assigned
- Whether landlord approval is required
- Remaining lease term
- Renewal options
- Rent increases
- Personal guaranty requirements
A successful practice purchase can become complicated if the buyer cannot secure the location.
5. Non-Compete Agreement
Most dental practice sales include some form of non-compete agreement.
The LOI should address:
- Geographic restrictions
- Length of restriction
- Scope of activities restricted
A reasonable non-compete protects the buyer’s investment while allowing the seller to continue their career.
Common Mistakes Dentists Make With LOIs
Signing Too Quickly
A dentist may feel pressure to sign an LOI before another buyer does. However, moving too quickly can create problems later.
Take the time to understand the terms before committing.
Focusing Only on Price
The purchase price is only one part of the transaction.
Other terms, such as the lease, transition plan, and seller obligations, may have an even greater impact on the success of the acquisition.
Waiting Until the Purchase Agreement to Get Legal Advice
By the time the Purchase Agreement is drafted, many important terms have already been negotiated.
Having an attorney review the LOI early can help identify risks and protect your interests from the beginning.
What Happens After an LOI Is Signed?
After signing an LOI, the parties typically move forward with:
- Due diligence – reviewing financial, legal, and operational information.
- Financing – finalizing loans and funding arrangements.
- Purchase Agreement – negotiating the final legal documents.
- Lease Transfer – obtaining landlord approval if required.
- Closing – transferring ownership of the practice.
Final Thoughts
A Letter of Intent is more than just a preliminary document. It establishes the foundation for the entire dental practice transaction.
For buyers, it is an opportunity to protect your investment before committing to a purchase. For sellers, it helps create clarity and avoid misunderstandings during the transition.
Before signing an LOI, make sure you understand the terms and have the right legal guidance on your side.
At FIAT Law Firm, we help dentists confidently navigate practice purchases, sales, contracts, and business decisions.
FIAT Law Firm — Helping Dentists Build, Protect, and Grow Their Practices.