A letter of intent sets the price, structure and timetable, and the exclusivity you grant a buyer stops you talking to anyone else while it does diligence. Most of it is not binding, but exclusivity, confidentiality and deposit terms usually are, so read it as closely as the buyer does.
What you are agreeing to give upSigning a letter of intent usually means granting the buyer exclusivity: a promise not to negotiate with, or actively solicit, other buyers for a set period.
Signing a letter of intent usually means granting the buyer exclusivity: a promise not to negotiate with, or actively solicit, other buyers for a set period. In exchange the buyer commits time and money to due diligence. The trade only works for you if the period is realistic and tied to the buyer actually moving the process forward, not open-ended while the buyer takes its time.
Push back on an exclusivity period longer than the diligence genuinely requires, and ask for your own right to end it if the buyer misses milestones or stops responding.
Price, structure and what is includedSettle as much as you reasonably can before signing: the price, how it will be paid, whether the deal is assets or shares, what is included and excluded, any working capital target, and the deposit terms.
Settle as much as you reasonably can before signing: the price, how it will be paid, whether the deal is assets or shares, what is included and excluded, any working capital target, and the deposit terms. The structure question, assets or shares, affects your tax result more than almost anything else in the deal, so get preliminary tax advice before agreeing to it rather than after.
A vague letter of intent that leaves structure to be decided later often turns into a fight, once the buyer has invested in diligence and has more leverage.
Deposits, and what is actually bindingA deposit shows commitment and should be held in a lawyer's or broker's trust account, with the letter of intent stating clearly when it is refundable to the buyer and when, if ever, you can keep it.
A deposit shows commitment and should be held in a lawyer's or broker's trust account, with the letter of intent stating clearly when it is refundable to the buyer and when, if ever, you can keep it. Whether a document binds in Ontario depends on what the parties intended and whether the essential terms are certain, not on its label; most letters of intent state the deal terms are non-binding but make confidentiality, exclusivity and cost provisions binding on purpose.
Read those binding clauses as carefully as the rest of the agreement, since for the length of the exclusivity period they are the whole contract.
Getting it reviewed before you signBuyers, and brokers using a standard form, draft letters of intent to move their own side of the deal forward.
Buyers, and brokers using a standard form, draft letters of intent to move their own side of the deal forward. We review it for what actually binds you, whether the exclusivity period and conditions are fair, and whether anything agreed now will be hard to walk back once the purchase agreement is drafted. This is also the point to flag any issue you already know a buyer will find in diligence, since surfacing it yourself usually costs less than a buyer finding it later.
Your steps
Who's involved
Proposes the price and terms and, once exclusivity begins, starts formal due diligence.
Advises on the after-tax result of an asset sale versus a share sale before you commit to either.
Often supplies the first letter of intent form and negotiates on your behalf if you used one to market the business.
Reviews the letter of intent for binding terms, exclusivity and deposit conditions before you sign.
Documents you will need
Tools for this stage
Enter your target closing date to see when each stage typically needs to happen when you are the one selling. Consents and buyer financing set the pace. Treat the dates as a guide, not a fixed schedule.
QuizHow ready is your business to go to market?Six quick questions on records, structure and personal readiness. The result points to what to tackle first; it is not a valuation.
Guides to download
Questions people ask
Is a letter of intent binding on me as the seller?
Usually only in part. The price and deal terms are normally non-binding until a definitive purchase agreement is signed. Confidentiality, exclusivity and cost provisions are typically binding regardless of the label on the document, so read them as closely as the rest.
How long should I give a buyer exclusivity?
Only as long as genuine diligence, financing and negotiation of the purchase agreement realistically take. Sixty to ninety days is common for a small business. Tie any extension to the buyer meeting agreed milestones, not to the buyer simply asking for more time.
Can I keep the deposit if the buyer walks away?
Only if the letter of intent says so clearly. Write down exactly which circumstances let you keep it and which require you to return it, rather than leaving the point to be argued about after the fact.
Should the letter of intent say assets or shares?
State it if you can; the choice drives your tax result and is hard to reopen once diligence has started. If truly undecided, say so and set a date to settle it once both sides have preliminary tax advice.
Can I keep talking to other interested buyers during exclusivity?
Not if the exclusivity clause is a genuine no-shop, which most are. You can usually keep records of unsolicited approaches, but actively negotiating or sharing information with another buyer during the period is typically a breach.
Also in this centre
Read more
Related centres
Other Learning Centres for the same transaction.
Sources
- Business Corporations Act, R.S.O. 1990, c. B.16
- Income Tax Act, s. 68 (allocation of consideration)
- Corporations Information Act, R.S.O. 1990, c. C.39
General information about Ontario law as of 25 September 2026, not legal advice. It does not create a lawyer–client relationship.
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