Understanding Letters Of Intent For Your Colorado Business
At the Law Offices of Clifton Black, PC, in Colorado Springs, our business law attorneys have decades of combined experience providing customized legal guidance to businesses and companies throughout Colorado. If your business needs a Letter of Intent, our seasoned business attorneys can provide guidance regarding Colorado laws and evaluate the impact a Letter of Intent will have on your business interests.
What Is A Letter Of Intent?
A Letter of Intent (often referred to as an LOI) is a legal document that outlines the main terms and conditions of a contemplated business transaction. In a commercial transaction, the purpose of a Letter of Intent is to set forth the main terms of an anticipated transaction before the definitive and final contracts are drafted. A Letter of Intent defines the initial terms of the parties’ agreement.
Furthermore, a signed Letter of Intent can provide legal protection should any disputes arise in the future. Often, while drafting definitive documents, business attorneys will refer back to the main terms of the Letter of Intent as negotiations proceed for the final legally binding definitive contracts.
Why Should You Use A Letter Of Intent?
Using a Letter of Intent can help the parties save considerable time, energy and resources. As they negotiate the terms of their contract and reach agreements on those terms, a Letter of Intent sets forth those initial terms. An experienced business law attorney can use the Letter of Intent to create the definitive contract for the parties.
When Can A Business Use A Letter Of Intent In Colorado?
A Letter of Intent is an important document in a business transaction in Colorado, as it can be used to signify just about any basic agreement between two or more parties. Letters of Intent can be used for a variety of purposes, including:
- Real estate transactions
- Business agreements
- Purchase agreements
Whether you are buying or selling a business or your business is buying or selling substantial business assets, a Letter of Intent can clarify the terms of your agreement in advance. Letters of Intent can even be used for supply agreements, service agreements, employment agreements and any other business dealings that can have legal outcomes.
Using Letters Of Intent To Define Verbal Agreements
Our experienced business attorneys have also used Letters of Intent for clients who want to formalize a verbal agreement. By using a Letter of Intent to clarify the terms of a verbal agreement, our business lawyers can learn if the parties are in agreement on the terms. A Letter of Intent can identify misunderstandings or miscommunications in advance. This can help us discern if additional negotiations regarding the contract’s terms will be needed and ensure that the parties are in agreement on the main terms. As experienced business attorneys in Colorado Springs, we can prepare a Letter of Intent for your Colorado business with the goal of simplifying the process.
Are Letters Of Intent Legally Binding In Colorado?
Generally speaking, Letters of Intent are not binding in Colorado. The language used in a Letter of Intent often indicates that it is not binding. However, sometimes, the parties choose to make a Letter of Intent legally binding. This is usually not recommended because, by its nature, it is meant to help define the terms of a more comprehensive agreement.
A Letter of Intent can be nonbinding yet have some binding terms. For example, when buying or selling a business, each party often provides confidential information to the other party. A buyer of a business may be required to provide its financials or proof of funds to show the seller that it has the wherewithal to complete the purchase through a closing.
Likewise, a seller will likely provide financials like a profit and loss statement, balance sheet, taxes, owner’s equity, an operating agreement, customer lists and other confidential information. We want to ensure that our clients have protection when disclosing confidential business information and thereby may require that certain terms of a Letter of Intent be binding on the parties.
Terminating A Letter Of Intent
Business owners should ensure that a Letter of Intent has termination language. If a seller of a business enters into a Letter of Intent to sell a business, a buyer may want a provision stating that the seller will not continue to entertain other offers.
A buyer may expend resources, conduct due diligence, review financials, negotiate leases, hire a business appraiser or CPA, pay a business lawyer to draft definitive documents, and do other work in an effort to buy a business. It is natural to assume that a buyer does not want to utilize valuable time, energy, and money without knowing the seller can’t suddenly sell to another buyer.
However, termination language should allow a party to terminate the negotiations and a Letter of Intent if a deal is not moving forward, the parties are no longer negotiating in good faith or after a certain period of time has passed without executed definitive contracts.
Trust Our Experienced Business Lawyers
Our firm’s business lawyers have decades of combined experience helping Colorado clients navigate commercial transactions and business conflicts. We help clients identify the best business structure from corporations, limited liability companies or other business entities. Our firm’s attorneys prepare, review, advise and amend various legal documents, including leases, purchase agreements, promissory notes, security agreements, deeds of trust, and licensing agreements, to name a few.
Our corporate attorneys also have substantial experience representing clients in highly regulated industries and assisting clients in obtaining proper licensing for their companies. Our lawyers have the knowledge of Colorado business laws and the experience to guide you through using a Letter of Intent to achieve your business goals.
Schedule A Consultation With A Colorado Springs Business Lawyer
You can schedule a consultation by calling our office at 719-328-1616. You can also reach out to us online to schedule an appointment. We look forward to helping you identify your business’s goals and crafting customized legal strategies to help you achieve them.