Is there a difference between a deposit and a break fee in an LOI?

Yes, and confusing the two is a common source of misunderstanding when reading an LOI. A deposit is typically money put forward early, usually as a sign of the buyer's commitment, that's meant to be held (often in trust) and either applied to the purchase price at closing or returned or forfeited depending on how the deal unfolds and what the deposit terms specifically say. A break fee works differently: it's a payment owed if a party terminates the deal, or a specific triggering event occurs, functioning more like a pre-agreed cost for walking away than security tied to the price.

The practical difference shows up in when and why money changes hands. A deposit is usually there from early on regardless of what eventually happens; a break fee only becomes relevant if the deal actually falls apart in a way the clause was written to cover. Neither is standard in Ontario business-sale LOIs — both are uncommon, especially in smaller deals, and only appear at all because the parties specifically negotiated them.

If your LOI includes either, or you're considering asking for one, have a Treadstone business lawyer draft the specific terms, since generic language for either tends to create disputes later.