What Is a Letter of Intent (LOI) & Why Is It Important?
August 3, 2026 | Carole Clark Isakson
A letter of intent (LOI) is an important document often used to initiate a business transaction. After some initial business discussions and general agreement on terms, the buyer will present an LOI to the seller to signal their serious commitment to doing business with them. It outlines preliminary terms of the agreement, defines expectations, and establishes points to be negotiated. An LOI is typically non-binding, but it plays a key role in setting the direction of the transaction. Therefore, professional legal counsel is critical for creating an LOI that sets up a successful business transaction.
What Is a Letter of Intent (LOI) Used for?
A letter of intent can be used to accomplish many things in the early stages of a business transaction:
- Announce the nature of a deal between two parties, such as a merger, acquisition, or joint venture.
- Propose the basic structure of a deal, including the potential price, timeline, and conditions.
- Define expectations and create transparency before finalizing the agreement.
- Provide a framework for continuing negotiations.
- Protect all parties with confidentiality agreements and exclusivity provisions.
Why Writing a Letter of Intent (LOI) Requires Legal Counsel
Although letters of intent generally aren’t binding, the confidentiality and exclusivity provisions will be; the parties may also agree that certain other provisions are binding. An LOI may also include clauses related to fees, choice of law, or dispute resolution.
To ensure your business interests are protected from the earliest stages of a transaction, you should consult with a business attorney experienced in this area. An attorney can review your LOI, add critical clauses, and clarify language that may be binding.
Even if an LOI doesn’t contain binding clauses, it still sets the foundation for a business deal. A poorly written LOI can lead to unintended consequences, confusion, and a less-than-successful business transaction. So even if you don’t think you need an attorney’s help, it is always prudent to consult with one.
Why You Shouldn’t Use AI to Write a Letter of Intent (LOI)
A letter of intent may be a preliminary, non-binding document, but that doesn’t mean you don’t need to take it seriously. On the contrary, an LOI defines the direction of the business transaction and establishes clear expectations for all parties involved. Businesses cannot afford to include unclear language, unintentional obligations, or inaccurate information in an LOI. Using artificial intelligence (AI) to write your LOI exposes your business to these risks and many others.
AI may be a convenient tool, but it is not a legal expert, nor is it an expert on your business. AI has been known to cite inaccurate or outdated information and even hallucinate information in an effort to present the user’s desired response. It is not trained to write or understand legally binding language. It doesn’t know your business’s history, goals, or expectations. Relying on AI to write a letter of intent is not only unwise—it endangers your business.
Rely on Professional Business Attorneys to Create Your Letter of Intent (LOI)
A well-structured letter of intent paves the way for a successful business transaction. In contrast, a poorly structured letter of intent can be disastrous for your business. Partnering with a trusted business attorney to create your letter of intent sets you up for success and protects your critical interests.
At Barna, Guzy & Steffen, our business attorneys know how to craft a letter of intent that clearly defines your expectations, outlines necessary provisions, communicates key information, and effectively sets the stage for your transaction. With a history of legal excellence beginning in 1938, Barna, Guzy & Steffen is trusted by business owners and professionals throughout Minnesota and beyond.
Contact us today to request personalized legal assistance from a business attorney.
For more information on how to complete a business transaction, read our blog series:
Buying an Operating Business – Step 1. Know Your Seller, Know the Process.
Buying an Operating Business – Step 3. Closing Day is upon us! And what happens after that?