Accounting practice LOI term checklist

Accounting-practice LOI term checklist is a working review of a proposed letter of intent’s business terms, process obligations, and unresolved conditions. It helps the parties and their advisers identify what the proposal means before relying on it as the basis for diligence, financing, and definitive agreements.

What should an LOI accomplish for the seller?

It should make the proposed deal concrete enough to evaluate while accurately identifying which terms are preliminary and which obligations may apply immediately. Counsel should review the actual document’s effect; its title does not settle enforceability.

Use the seller hub to define the intended exit and constraints. Compare an offer with the seller’s required cash, remaining work, confidentiality expectations, timetable, and service-continuity needs.

The archived Journal of Accountancy succession deal-structure discussion illustrates practical transaction choices. Evaluate actual terms and records with current professional advice.

Evaluate conditions, deferred amounts, financing, seller commitments, and adjustments alongside price. Equal headline offers can require different risk and effort.

What is the numbered LOI review document?

For every item below, record the proposed term, seller position, open question, responsible adviser, and required decision date. Mark the term accepted, rejected, or unresolved only after its implications are understood.

1. Identify parties and structure. Confirm the buyer, seller entities, acquired interests or assets, ownership assumptions, and the responsible funding party.
2. Define the sale perimeter. Specify included and excluded services, engagements, assets, receivables, unbilled work, deposits, office interests, and material obligations.
3. Define price and consideration. Separate closing cash, seller notes, contingent amounts, equity, and other components. State the basis for each rather than relying on one total.
4. Describe adjustments. Identify baseline records, exclusions, measurement periods, collection definitions, calculation, documentation, payment timing, and proposed disagreement procedures.
5. Set financing conditions. Identify the funding approach, approval dependencies, evidence required, buyer equity assumptions, and the effect of an unsuccessful financing process.
6. Define diligence scope and access. Specify the review process, proposed timing, information boundaries, recipients, permitted staff or client contact, and release approvals.
7. Review process obligations. Have counsel identify exclusivity, confidentiality, costs, termination, deadlines, and any provisions intended to bind before definitive agreements.
8. Describe seller assistance. Specify tasks, duration, hours, compensation, reporting, limits, and the intended transition of client and professional responsibility.
9. Review workforce and service continuity. Identify proposed staff treatment, coverage gaps, engagement responsibilities, system readiness, and critical requirements for uninterrupted delivery.
10. Identify restrictive covenants and liabilities. Record proposed scope and treatment of claims, indemnities, insurance, restrictions, and relevant legal review questions.
11. Set closing conditions and schedule. Identify consents, approvals, definitive-document requirements, target dates, dependencies, and evidence required for release.
12. Document unresolved terms. Assign each open issue, desired resolution, and next action so a preliminary proposal does not become an unexamined assumption in the final agreement.

The asset-purchase agreement checklist follows these decisions into definitive terms. The LOI review should preserve the business rationale and unresolved conditions for that later drafting process.

How should cash timing be compared across offers?

Compare what the seller receives at closing and what remains dependent on future performance, payment, or issuer rights. Headline consideration is not the same as current spendable proceeds.

For illustration, assume Proposal A offers $500,000 fixed consideration: $400,000 closing cash and a $100,000 seller note. Proposal B offers $460,000 all cash at closing. These are hypothetical terms, not market evidence, recommended prices, or actual offers.

If seller debt payoff is $70,000 and seller costs are $15,000 in either proposal, A leaves $315,000 closing cash before tax, plus the note claim. B leaves $375,000 before tax. A has $40,000 more stated price but $60,000 less closing cash.

The comparison still needs interest, repayment, collateral, priority, default remedies, borrower ability, taxes, and other obligations. The note’s face value is not a guarantee of collection. A discounted present-value analysis would require explicitly selected timing and risk assumptions rather than an invented standard discount rate.

For any contingent component, show the measurement and downside case separately. Do not describe maximum possible consideration as an unconditional fixed purchase price or add future amounts to the seller’s closing receipt.

Which vague terms create avoidable misunderstanding?

Terms that leave the calculation, role, or condition undefined create room for competing interpretations. Turn a general promise into a specific question the parties and advisers can resolve.

Resolving these questions can change the seller’s preferred proposal. Keep a record of the agreed revision rather than relying on a telephone explanation that never appears in the reviewed document.

What current lender limits should be checked before accepting terms?

Check the actual financing program and ownership transaction with the lender before treating seller payments or continuing roles as executable. A commercially negotiated term can conflict with program requirements.

Current SBA SOP 50 10 8.1, effective October 1, 2026 prohibits seller earnouts for 7(a) changes of ownership. It distinguishes performance-based buyer rebates, with proceeds applied to loan principal. The parties should obtain lender review of the actual adjustment terms rather than assume changing a label establishes compliance.

Identify whether the financing applies to an initial acquisition, expansion, owner buyout, or another relevant category. Give the lender the complete consideration, seller-role, and ownership diagram, including contingent elements and side agreements.

If financing review requires changes, update the LOI, cash model, and seller commitment analysis together. A corrected payment clause can alter the proceeds or risk the seller expected. Keep the financing condition specific enough to reveal the remaining dependency.

How should diligence access and confidentiality be described?

Describe a staged process with approved recipients, purposes, access, and contact rules. An LOI can set process expectations, but it cannot substitute for the applicable legal and professional basis for client-information disclosure.

The IRS Section 7216 information center explains restrictions and relevant rules concerning tax return information. Qualified advisers should review the proposed diligence disclosures, exceptions, and any necessary consents before sensitive records are released.

Distinguish aggregate financial review from identified client records and operational system access. Require an approved method for staff or client contact, especially when premature communication could disrupt service or confidential sale preparation.

The sale exclusivity guide explores a related process commitment. Review the proposed exclusivity period, milestones, extension mechanism, and termination consequences with counsel rather than assume a preliminary proposal carries no immediate obligations.

What seller-assistance detail belongs in the proposal?

Enough detail should appear to establish whether the seller can perform the expected handoff and whether its cost is included in the price or separately paid. Resolve material workload expectations before agreeing to a vague transition promise.

Map introductions, technical context, staff training, open matters, availability, escalation, and the planned transfer of decisions. State whether seller involvement is a proposal or an agreed obligation, and identify relevant lender and professional requirements.

For an illustrative 80-hour transition budget, 30 hours of introductions, 25 of training, and 25 of open-matter support consume the full allowance. An added 20 hours of review would create 100 hours of demand. The parties need to resolve scope and compensation through the actual agreement rather than assume the seller has unlimited availability.

How should the seller make the final LOI decision?

Decide against the whole proposed transaction, including cash timing, obligations, feasibility, and unresolved risks. Have the appropriate advisers explain material legal, tax, professional, and financing implications before execution.

Compare the accepted terms with the seller’s stated priorities and identify what must still occur. The closing-day checklist provides a later evidence standard for final conditions; it should not conceal gaps that need resolution now.

Maintain the reviewed LOI, revision history, issue list, and current financial assumptions in the controlled transaction file. A useful LOI gives diligence and drafting a clear starting point while preserving honest boundaries between negotiated terms, proposed changes, and conditions still to be satisfied.