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Free buyer resource · ClosingFrom offer to closing day
How a business purchase moves from letter of intent to signed purchase agreement, funded loan and keys in your hand.
Free guide · No fees for buyersClosing on a business purchase usually follows this order: sign a letter of intent (LOI), complete due diligence and financing, negotiate the purchase agreement, then sign and fund on closing day, when money moves through escrow and ownership transfers. A planned handover period with the seller follows. From signed LOI to closing commonly takes two to four months.
Once you and the seller agree a price, the work shifts from finding and valuing to documenting and transferring. Clear paperwork and a realistic timeline keep the deal from stalling.
This free guide explains each stage. Use an attorney experienced in business acquisitions to draft and review the documents.
How to do it
Sign the letter of intent
The LOI sets out the price, structure, financing, timeline, due diligence access and an exclusivity period. Most terms are non-binding, but confidentiality and exclusivity usually are binding.
Choose asset or share purchase
Most small-business deals are asset purchases, where you buy selected assets and leave most past liabilities with the seller. In a share purchase you take over the company and its history. Tax treatment differs, so get advice.
Negotiate the purchase agreement
The purchase agreement covers the final price and how it is paid, what is included, the seller's representations and warranties, indemnities, non-compete terms, working capital and the transition period.
Clear the closing conditions
Typical conditions include loan approval, landlord consent to assign the lease, transfer of licences and any third-party consents for key contracts.
Close and fund
On closing day the parties sign, the lender funds, money moves through escrow or the closing attorney, and ownership, keys and passwords transfer. In an asset purchase, both sides typically report the price allocation to the IRS.
Run the handover
Agree how long the seller will stay to train you and introduce customers and suppliers. Many deals include a few weeks to a few months of support.
Options compared
| Document | What it does |
|---|---|
| Letter of intent (LOI) | Records the main deal terms before full diligence |
| Asset or share purchase agreement | The binding contract for the sale |
| Bill of sale and assignments | Transfer assets, contracts and intellectual property |
| Lease assignment or new lease | Gives you the right to stay in the premises |
| Promissory note | Records any seller financing |
| Non-compete and transition agreement | Stops the seller competing and sets out handover support |
General information only. Figures and rules vary by deal, lender and location.
Common mistakes
- Treating the LOI as a formality and leaving key terms vague.
- Not getting landlord consent early, which can delay closing for weeks.
- Skipping a working-capital or inventory adjustment at closing.
- Agreeing a handover period too short for you to learn the business.
Frequently asked questions
Is a letter of intent binding?
Most LOI terms, such as price and structure, are non-binding. Clauses on confidentiality, exclusivity and sometimes costs are usually binding. Your attorney can confirm which is which.
What is the difference between an asset and a share purchase?
In an asset purchase you buy chosen assets and usually leave most past liabilities with the seller. In a share or stock purchase you buy the company itself, including its liabilities and contracts.
How long from LOI to closing?
Commonly two to four months, depending on due diligence, lender approval and third-party consents such as the landlord.
What is escrow at closing?
A neutral party holds the funds and documents and releases them when all conditions are met, so neither side has to trust the other to go first.
What does a non-compete do?
It stops the seller from opening a competing business or taking customers for an agreed time and area after the sale, within what local law allows.
How long should the seller stay after closing?
It varies, but a few weeks to a few months of training and introductions is common, and the terms should be written into the purchase agreement.
Ready to move forward?
Questions about this step? Email [email protected] and we will point you to the right guide.
BusinessBuy.site provides free educational information, not legal, tax, lending or investment advice. Speak to a qualified accountant, attorney or lender about your deal.