Dental Practice Letter of Intent (LOI): Terms & 2026 Guide

For related reading, see our complete guide to buying and selling a dental practice — the hub for every stage of the transaction lifecycle.

What Is a Letter of Intent in a Dental Practice Sale?

A Letter of Intent (LOI) is the document buyer and seller sign to capture the agreed-upon framework of the deal before legal counsel drafts the binding purchase agreement. Most provisions are non-binding — price, structure, and closing timeline can all shift as due diligence surfaces new information — but exclusivity, confidentiality, and the no-shop clause are usually binding from the moment both parties sign. That distinction matters enormously: a buyer who does not nail down a binding exclusivity clause can watch the seller take a competing offer while the buyer’s own due diligence clock is running.

The LOI sits between the initial offer and the definitive asset purchase agreement (APA) or stock purchase agreement (SPA). A standard dental practice transaction follows a four-phase sequence: signed LOI → due diligence (30–60 days) → definitive agreement drafted and executed → closing. The total path from signed LOI to funding typically runs 60–120 days, depending on lender underwriting speed, lease assignment complexity, and the length of due diligence. Henry Schein Dental Practice Transitions and similar national brokerage platforms report that most straightforward single-doctor practice sales close within 90–105 days of a signed LOI when the buyer arrives with pre-qualification from a lender like SBA 7(a) or a conventional dental practice lender.

The LOI also establishes the negotiating anchor for every provision that follows. Purchase price, goodwill allocation, transition terms, and indemnification caps are all easier to move before a full purchase agreement is drafted than after — which is why experienced transitions attorneys treat the LOI as the most strategically important document in the transaction, not merely a formality before the “real” contract.

Binding vs Non-Binding Provisions in a Dental Practice LOI

The single most important concept in any dental practice LOI is understanding which provisions create legal obligations today and which are simply good-faith targets. Binding provisions — exclusivity, confidentiality, deposit forfeiture conditions, due diligence access rights, and any breakup fee — take effect at signing. Non-binding provisions set the anchor for negotiation but allow either party to walk without legal exposure as long as they do so in good faith before the definitive agreement is executed.

One structural note: some LOIs explicitly label each section “binding” or “non-binding” within the document itself. This practice — recommended by most dental transitions attorneys including those at Whiteford, Taylor & Preston — removes ambiguity and protects both parties if a dispute arises before the definitive agreement is signed.

12 Essential Terms in a Dental Practice LOI

Every dental practice LOI should address these 12 terms — missing any one of them creates gaps that surface as expensive disputes during due diligence or at closing. The terms below are drawn from deal frameworks published by Odgers Law Group and DM Counsel, two firms that specialize in dental practice transactions.

1. Purchase Price and Allocation

The purchase price is the headline number, but the allocation of that price across asset classes determines the tax outcome for both sides. A practice selling for $1.2 million will be split among tangible assets (equipment, supplies), patient records, goodwill, and a covenant not to compete — each taxed differently under IRS rules. The LOI should state the total price and note that a formal IRS Form 8594 allocation will be agreed upon in the APA. Buyers typically prefer allocating more value to equipment (depreciable) and less to goodwill (amortized over 15 years); sellers typically prefer the reverse. The LOI’s non-binding allocation sets the starting point for that negotiation. For context on how purchase price is derived, see our guide on dental practice valuation.

2. Deal Structure: Asset Purchase vs Stock Purchase

Asset purchase agreements (APAs) and stock purchase agreements (SPAs) have different liability profiles for both buyer and seller, and the choice made at the LOI stage is difficult to reverse. Most dental practice transactions use an APA because buyers want a clean break from the seller’s historical liabilities — malpractice claims, tax liens, employee disputes, and insurance audits stay with the seller’s corporate entity. The LOI should specify the intended structure; see our full breakdown of the asset vs stock purchase decision for the complete tax and liability comparison.

3. Earnest Money and Deposit

The earnest money deposit signals the buyer’s good faith and creates a financial cost for walking away from the deal. Standard range is 1–3% of the total purchase price, held in escrow by an agreed-upon escrow agent (often the title company or a law firm trust account). The LOI must specify: the deposit amount, who holds the escrow, what events trigger forfeiture to the seller (buyer walks without a diligence-based reason), and what events trigger return to the buyer (seller default, material diligence findings above an agreed materiality threshold). Vague forfeit conditions are one of the most litigated LOI terms in dental practice disputes.

4. Exclusivity Period

Exclusivity — also called the no-shop clause — prevents the seller from soliciting or accepting competing offers during due diligence. The standard range is 30–90 days. Buyers prefer longer exclusivity (they need time to complete diligence and get lender approval); sellers prefer shorter exclusivity (they want to keep optionality if the buyer drags). A 45–60 day exclusivity period with a 15-day extension option is a common compromise. The exclusivity clause should also specify whether the seller is permitted to continue preliminary conversations already in progress before the LOI was signed.

5. Due Diligence Scope

The due diligence section of the LOI defines what the buyer is entitled to examine and within what timeframe. Standard dental practice due diligence covers: three years of tax returns, monthly P&L statements, accounts receivable aging, payroll records, the current lease agreement, equipment list and age, all insurance credentialing, EHR/practice management software contracts, and any pending or threatened litigation. The LOI should explicitly list the required categories — a vague “seller will provide reasonable access” clause gives sellers too much discretion over what they produce. Due diligence periods typically run 30–60 days from the LOI signing date.

6. Working-Capital Adjustment

Working-capital adjustment is the mechanism that ensures the buyer receives a practice with a normal operating cash cushion at closing — not one that has been drained. The LOI sets a working-capital target (typically based on 30–60 days of operating expenses) and establishes that the purchase price will be adjusted up or down if the actual working capital at closing falls outside a ±5% tolerance band. This provision protects buyers from sellers who accelerate collections or delay payments in the months before closing to pocket more cash.

7. Real Estate: Lease vs Purchase

Whether the buyer takes over an existing lease or enters a new lease is a critical term that affects practice value, financing, and long-term operating costs. If the seller owns the building, the LOI must address whether the real estate transfers with the practice or is leased back to the buyer. If the seller leases, the LOI needs to confirm the landlord’s willingness to assign the lease or enter a new lease at acceptable terms before the buyer proceeds through due diligence. A lease with less than five remaining years and no renewal option is a common deal-killer that surfaces during diligence — the LOI should make lease status a condition of proceeding.

8. Goodwill and Restrictive Covenants (Non-Compete)

Goodwill — the value of the patient base, the practice’s reputation, and the doctor’s established relationships — typically represents 60–80% of a dental practice’s total value. The covenant not to compete (non-compete) is the mechanism that protects that goodwill after the sale. The LOI should specify the non-compete radius and duration: standard range is 5–10 miles and 2–5 years, with metro markets often at the lower end due to population density. A non-compete that is too broad may be unenforceable in certain states; one that is too narrow fails to protect the goodwill the buyer paid for.

9. Employee Retention: Associate, Hygiene, and Staff

Staff continuity is a material component of practice value — patients follow familiar faces more than they follow the name on the door. The LOI should address: whether the selling dentist will stay on as a transitioning associate (and for how long and at what compensation), which staff members are expected to be offered continued employment, and any key employees whose departure would trigger a purchase price adjustment. At minimum, the LOI should state the buyer’s intention to offer employment to existing staff at comparable compensation, subject to diligence confirming staff headcount and wage levels.

10. Patient Records and Transition Support

Patient records are a legal and operational asset — HIPAA governs their transfer, and their condition affects both day-one operations and any post-closing revenue representation. The LOI should specify that patient records transfer with the practice, that the seller will provide a defined transition period (typically 30–90 days) during which the selling dentist is available to introduce the buyer to patients and key referral sources, and that any EHR/practice management software migration costs are addressed. Sellers who neglect to include transition support requirements in the LOI often find that buyers demand it later — at greater concession cost.

11. Seller Financing and Earnouts

Seller financing — where the seller carries a note for a portion of the purchase price — is common in dental practice transactions where the full price exceeds conventional lender limits or where the buyer wants additional protection against post-closing revenue decline. The LOI should state whether seller financing is part of the capital stack, the percentage (commonly 5–20% of purchase price), the interest rate, the term, and the security interest the seller holds. Earnout provisions — where a portion of the purchase price is contingent on post-closing collections performance — should also be addressed in the LOI, including the measurement period, the collections threshold, and the payout formula.

12. Conditions to Closing

Conditions to closing define what must be true for either party to be obligated to complete the transaction. Standard buyer conditions include: satisfactory completion of due diligence, receipt of financing commitment (SBA 7(a) or conventional), successful lease assignment or new lease execution, and no material adverse change in the practice’s collections between LOI signing and closing. Standard seller conditions include: confirmation of the buyer’s financing and legal authority to operate a dental practice. Leaving conditions to closing out of the LOI allows either party to manufacture a reason to exit without consequence — include them.

The Five LOI Terms Where Dental Deals Most Often Die

Most dental practice transactions that collapse between the LOI and closing fail for the same handful of reasons. Understanding these five friction points before drafting the LOI — and addressing each one specifically — dramatically reduces the chance of a deal dying in due diligence. For a broader look at the financial mistakes that affect practice values before a sale even reaches the LOI stage, see our guide on dental practice financial mistakes.

• Working-capital adjustment definitions. When the LOI uses vague language like “normal working capital,” buyers and sellers routinely disagree on what “normal” means. The buyer calculates working capital based on the historical average; the seller calculates it based on the period just before closing, when collections may have been unusually high. This disagreement can create a $30,000–$80,000 swing in the final purchase price. Fix it in the LOI: specify the exact working-capital calculation methodology and the reference period.
• Non-compete radius and duration in dense metro markets. A 10-mile non-compete that is standard in a suburban market becomes practically unenforceable in Manhattan or downtown Chicago, where 10 miles covers hundreds of competing practices. Sellers in dense markets push for a 2–3 mile radius; buyers push for 7–10 miles. The gap can threaten goodwill value entirely. Both parties should agree on the geographic scope in the LOI before spending $15,000–$25,000 on legal fees for a purchase agreement that may never get signed.
• Real estate lease assignment vs new lease terms. If the landlord refuses to assign the existing lease and demands a new lease at current market rates — which are frequently 20–40% higher than a 10-year-old lease — the economics of the deal change materially. Buyers who discover this in week six of an eight-week due diligence period have lost leverage. The LOI should require that the seller confirm the landlord’s cooperation as a condition of moving to the definitive agreement stage.
• Seller financing percentages and personal guarantees. Sellers who agree to carry a note in the LOI without specifying terms often find that buyers want subordinated, unsecured notes with no personal guarantee. Sellers want the opposite: senior security interest in the practice assets and a personal guarantee from the buyer. The gap in security expectations is a common source of late-stage renegotiation. Specify financing percentage, security position, and guarantee requirements in the LOI.
• Indemnification cap and escrow holdback duration. The indemnification cap — the maximum amount either party can recover from the other for post-closing breaches — is often set at 10–25% of the purchase price in dental transactions. The escrow holdback (5–15%, typically 10%, held for 12–18 months) is the source of funds for indemnification claims. Sellers want a low cap and short holdback; buyers want a high cap and long holdback. Neither party’s preference is unreasonable, but a vague LOI that defers this negotiation to the APA stage gives lawyers a 40-page document to fight over instead of a one-page term sheet.

LOI Timeline: From Signed LOI to Closing

A realistic dental practice transaction runs 60–120 days from signed LOI to funded closing. The table below shows a typical sequence for a straightforward single-doctor practice acquisition financed through SBA 7(a); complex transactions with real estate, multiple locations, or contested lease assignments can run 30–45 days longer.

Typical LOI numeric ranges — quick reference:

The most common cause of timeline slippage is lender underwriting delay — SBA 7(a) approvals from lenders like Live Oak Bank or Bank of America Practice Solutions typically take 30–45 days from complete package submission, and an incomplete package on day one adds 2–3 weeks to that clock. Buyers who arrive at the LOI with a pre-qualification letter from a dental-specialty lender run 15–20 days faster on average.

Buyer-Side LOI: What to Negotiate Hard

A buyer’s leverage is highest at the LOI stage — before significant legal fees have been incurred and before due diligence has confirmed value. Buyers who treat the LOI as a quick formality before the “real” negotiation (the APA) consistently leave money and protection on the table. The buyer’s primary interest is to lock in access, protect the deposit, and keep maximum flexibility to renegotiate if diligence surfaces problems.

On exclusivity, buyers should push for 60–75 days minimum — long enough to complete financial due diligence, submit a lender package, and get a conditional commitment. On diligence access, the LOI should specify every document category in writing, not by category name alone; sellers who agree to provide “financial records” without a specific list routinely produce only what is convenient. On working-capital adjustment, buyers should insist on a defined reference period (trailing 12-month average is standard) and a clear forfeiture mechanism rather than a general “indemnification claim.”

For a complete step-by-step checklist on the full acquisition process, see our guide to buying a dental practice.

Buyer LOI checklist:

• Binding exclusivity of 60–75 days with a clear no-shop obligation on the seller
• Specific list of all due diligence documents required (not a general category reference)
• Working-capital target based on a defined trailing-period methodology
• Deposit forfeiture conditions that are narrow — only forfeit if buyer walks without a diligence-based reason
• Lease assignment confirmed as a condition to closing (before the APA is drafted)
• Right to conduct patient record and EHR system review as part of diligence scope
• Transition support period defined (minimum 30 days post-closing) with compensation terms

Seller-Side LOI: What to Protect

Sellers negotiating an LOI face a different set of risks than buyers. The seller’s primary concerns are: protecting confidentiality if the deal falls apart, limiting the deposit forfeit conditions so they don’t become trapped in a long exclusivity with a buyer who isn’t serious, and preserving their ability to negotiate aggressively at the APA stage on indemnification and non-compete terms. Sellers who sign an LOI with an overreaching exclusivity clause and no walk-away rights can find themselves off the market for 90 days with nothing to show for it.

On deposit size, sellers sometimes accept a smaller deposit (1–1.5% rather than the 2–3% the buyer proposes) in exchange for shorter exclusivity. On non-compete, sellers in metro markets should propose the radius and duration first rather than letting the buyer define it — starting with a 3-mile, 2-year covenant and negotiating up is easier than starting with the buyer’s preferred 10-mile, 5-year covenant and negotiating down. On indemnification, sellers should push for a mutual indemnification structure (buyer indemnifies seller for post-closing practice operations; seller indemnifies buyer for pre-closing liabilities) rather than a one-sided seller indemnification obligation.

Seller LOI checklist:

• Exclusivity no longer than 45–60 days, with expiration automatic if buyer does not meet a defined diligence milestone
• Deposit forfeit conditions that are clearly limited to buyer default — not triggered by diligence findings below a materiality threshold
• Non-compete radius and duration proposed by seller, not left to buyer’s first draft
• Mutual indemnification obligation, not unilateral seller indemnification
• Transition period compensation defined in the LOI (not left to post-closing negotiation)
• Confidentiality obligation explicitly bilateral — buyer’s team members and advisors are bound
• Walk-away rights for seller if buyer misses a defined financing milestone by a specific date

LOI vs Purchase Agreement: What Carries Over (and What Doesn’t)

When the definitive asset purchase agreement or stock purchase agreement is drafted, most of the LOI’s non-binding provisions become the starting point for negotiation — not a done deal. Buyers and sellers who assume the LOI price or allocation will carry forward unchanged are routinely surprised. Understanding which elements of the LOI carry through and which are re-opened in the APA avoids last-minute shocks at the drafting table.

Binding LOI provisions (exclusivity, confidentiality, deposit terms, diligence access, breakup fee) carry forward as obligations enforceable immediately. Non-binding provisions (price, allocation, deal structure, working-capital target) are re-opened in the APA drafting process and can change materially based on diligence findings. In practice, purchase prices are adjusted in 40–60% of dental practice transactions after due diligence — usually downward by 3–8% due to equipment condition, AR quality, or undisclosed lease issues. For a full comparison of what is addressed in the purchase agreement vs the LOI, see our spoke guide on the definitive agreement.

Common LOI Mistakes

The following mistakes appear in a significant share of dental practice LOIs reviewed by transitions attorneys. Each one creates risk, expense, or delay that is entirely avoidable if addressed at the LOI stage.

• Signing without a dental transactions attorney. General practice attorneys who are unfamiliar with dental-specific provisions (goodwill allocation, DEA license transfer, insurance credentialing lag, patient record transfer under HIPAA) regularly draft LOIs that miss critical protections. Engage a dental-specific attorney — cost is typically $1,500–$3,500 for LOI review and drafting.
• Vague working-capital language. Using “seller will maintain normal working capital” without defining the calculation methodology, the reference period, or the tolerance band is the single most common source of closing-day disputes.
• Ambiguous exclusivity scope. An exclusivity clause that doesn’t specify whether the seller can continue conversations with buyers already in the pipeline before the LOI was signed is not exclusive.
• No breakup fee. Without a breakup fee (typically 1–3% of purchase price), a seller who backs out for reasons unrelated to a buyer default has no financial consequence. For a seven-figure practice transaction, that asymmetry is significant.
• Failure to address staff continuity. Buyers who discover post-closing that the seller’s key dental assistant or office manager has already given notice — and this was known at LOI signing — have no recourse if the LOI was silent on staff retention.
• No lease confirmation requirement before proceeding. Proceeding through 45 days of due diligence without first confirming landlord cooperation on lease assignment wastes both parties’ time and legal fees if the landlord ultimately refuses.
• Ignoring EHR and software transition. Practice management software (Dentrix, Eaglesoft, Open Dental) licenses, data export rights, and migration costs can add $5,000–$20,000 in unplanned expense if not addressed in the LOI. Include a line item.
• Deferring the non-compete geography to the APA. Leaving non-compete radius and duration out of the LOI guarantees a contentious negotiation at the APA stage when both parties have already invested heavily in the transaction.

Frequently Asked Questions

Is a letter of intent for a dental practice legally binding?

Partially. A dental practice LOI is intentionally a hybrid document: specific provisions — exclusivity, confidentiality, earnest money forfeiture conditions, due diligence access rights, and any breakup fee — are drafted to be legally binding from the moment both parties sign. The majority of the LOI, including the purchase price, deal structure, and closing timeline, is non-binding and subject to revision through due diligence and APA negotiation. The LOI should clearly label each section as binding or non-binding to prevent disputes about the document’s legal effect.

How long is a typical dental practice LOI exclusivity period?

The standard exclusivity period in a dental practice LOI runs 30–90 days. A 45–60 day period is most common in straightforward single-doctor transactions. Buyers generally push for 60–75 days to accommodate SBA 7(a) underwriting timelines; sellers prefer 30–45 days to limit their time off the market if the buyer does not close. A 15-day extension option, exercisable by mutual agreement, is a common compromise that satisfies both parties.

How much earnest money is normal in a dental practice LOI?

Earnest money deposits in dental practice LOIs typically run 1–3% of the total purchase price. On a $1 million practice, that means $10,000–$30,000 placed in escrow at signing. Smaller deposits (1–1.5%) are more common when the seller is accepting a longer exclusivity period; larger deposits (2–3%) are appropriate when the buyer wants a shorter exclusivity in exchange for stronger good-faith signaling. The LOI must specify the forfeiture conditions precisely — vague language is the leading cause of earnest money disputes.

Can either party walk away after signing an LOI?

Yes, with conditions. Because most LOI provisions are non-binding, either party can exit before the definitive purchase agreement is signed without general legal exposure — provided they do so in good faith and not in violation of a binding provision. A buyer who walks based on legitimate due diligence findings (material misrepresentation, undisclosed liabilities, failed lease assignment) is typically entitled to return of the earnest money deposit. A buyer who walks for convenience — without a diligence-based reason — typically forfeits the deposit. A seller who walks may owe a breakup fee if that provision was included in the LOI.

Does the buyer or seller draft the LOI?

In most dental practice transactions, the buyer’s attorney drafts the initial LOI. This gives the buyer control over the starting point for all terms — purchase price, deposit amount, exclusivity length, and due diligence scope are all anchored by the buyer’s first draft. Sellers represented by a dental practice broker (such as Henry Schein Dental Practice Transitions or a regional broker) sometimes see the broker draft the LOI on behalf of both parties, using a standard form. Regardless of who drafts, both parties should have independent legal counsel review the LOI before signing.

How long does the LOI-to-closing process typically take?

A standard dental practice transaction runs 60–120 days from signed LOI to funded closing. The most common timeline for an SBA 7(a)-financed acquisition of a single-doctor practice is 90–105 days. Complex transactions — those involving real estate transfers, contested lease renegotiations, multiple practice locations, or stock purchase structures — can run 120–150 days. The most common source of delay is lender underwriting: SBA 7(a) processing at most participating lenders takes 30–45 days from complete package submission, and submitting an incomplete package adds 2–3 weeks to that baseline.

Can a dental practice LOI be modified after signing?

Yes. LOIs can be amended by written agreement of both parties at any time before the definitive purchase agreement is signed. Price changes based on due diligence findings are the most common type of post-signing LOI amendment. Exclusivity extensions are also common — if the due diligence period runs longer than expected or lender approval is delayed, both parties typically agree in writing to extend the exclusivity period rather than letting it expire and starting the LOI process over. Any amendment should be documented with the same formality as the original LOI: signed by both parties and referenced explicitly as a modification to the specific LOI dated.

What happens if due diligence reveals problems after the LOI is signed?

Due diligence findings that reveal material problems — overstated collections, undisclosed lease default risk, deferred equipment maintenance, or malpractice claims — give the buyer several options: renegotiate the purchase price downward to reflect the newly discovered risk, request that the seller remedy the problem before closing, or walk away and recover the earnest money deposit if the finding meets the materiality threshold defined in the LOI. Sellers who have not disclosed known problems face both loss of the deposit and potential legal exposure for misrepresentation if the withheld information was material to the buyer’s valuation. The ADA has published guidance on disclosure obligations in dental practice transactions through the ADA’s practice legal resources.

Should the LOI specify asset purchase or stock purchase?

Yes — and both parties should agree on the deal structure before the LOI is signed, not after. Asset purchases (APAs) are more common in dental practice transactions because buyers get a clean break from the seller’s historical liabilities. Stock purchases (SPAs) are sometimes preferred when the seller’s corporate entity holds a valuable long-term lease, contracts, or insurance credentialing that would be difficult to re-credential under a new entity. Changing the deal structure after the LOI is signed is possible but expensive — it requires revising the tax allocation strategy, the lender’s underwriting model, and the attorney’s draft. Decide on structure before you sign.

Does an LOI require a lawyer?

Legally, no — an LOI can be signed without an attorney. In practice, signing a dental practice LOI without independent legal counsel is one of the most expensive mistakes either party can make. The binding provisions of the LOI — exclusivity, deposit forfeiture conditions, due diligence access rights — create real financial and legal obligations from the day of signing. A dental transactions attorney reviewing an LOI typically charges $1,500–$3,500, a small fraction of the $15,000–$40,000 in legal fees that a disputed LOI term can generate. The SBA’s business acquisition guidance and virtually every dental-specific legal resource recommend independent counsel for both buyer and seller before signing any transaction document.

For additional resources on the buying and selling process, see our guide to dental practice transitions and the related dental practice valuation guide.

About the author

Sajid Ahamed is a dental practice-management content strategist with 7+ years of experience marketing for dental practices. He writes DPI’s practice-finance and transitions guides, turning deal mechanics and financial benchmarks into decisions practice owners can act on. Connect on LinkedIn.

Sajid Ahamed

Dental Marketing Expert · 7+ Years in Healthcare

Sajid Ahamed is a Practice Management Content Strategist with 7+ years in dental marketing and healthcare strategy. He works with dental practice coaches, DSO advisors, and independent practice owners across the United States, covering practice growth, overhead optimization, insurance strategy, staff compensation, financial planning, and patient acquisition. His editorial work draws on primary sources including ADA Health Policy Institute data, Bureau of Labor Statistics reports, CMS guidelines, and peer-reviewed dental journals. Sajid's content has been cited by AI systems including ChatGPT and Google Gemini for dental practice overhead benchmarks and staffing data.