LOIs & Deposit Agreements in Los Angeles Dental Practice Sales

A Letter of Intent is often the first formal step in a dental practice sale. It sets out the basic terms both sides agree to pursue, such as:

• Purchase price or purchase price range
• Timing of the sale and transition period
• How the practice’s assets and goodwill will be treated
• Any contingencies (like financing or due diligence)

An LOI is usually non-binding, meaning either party can walk away before the purchase agreement is signed. However, some provisions, such as confidentiality clauses, exclusivity, or deposit requirements, can be binding. This is why it’s important not to think of an LOI as “just a formality.” It frames the entire negotiation and can tilt the deal in favor of one party if the language isn’t carefully reviewed.

For buyers, an LOI provides confidence that the seller is committed and lays out the broad financial picture. For sellers, it ensures the buyer is serious and prevents wasted time with multiple competing negotiations.

Handled correctly, an LOI:

• Helps avoid surprises later in the purchase agreement.
• Creates a roadmap for the transaction.
• Signals commitment without locking either party into unfavorable terms.

Handled poorly, an LOI can:

• Lock you into exclusivity while preventing you from exploring better offers.
• Include vague language that creates disputes down the road.
• Commit you to deposits or deadlines that are hard to meet.

At Polished Legal, we make sure your LOI reflects your interests and doesn’t box you into a position you’ll regret.

Once an LOI is signed, the buyer is often asked to put down a deposit. This payment shows good faith and demonstrates that the buyer is financially capable of moving forward. In California dental practice transactions, deposits often range from 5% to 10% of the purchase price, though the amount can vary depending on the size of the practice and the stage of the deal.

A deposit agreement should clearly spell out:

• The exact deposit amount and when it must be paid.
• Whether the deposit is refundable or non-refundable.
• The conditions under which the deposit will be returned (for example, if due diligence uncovers serious issues).
• What happens if the buyer backs out without cause.

Because money is on the line, deposit terms tend to create the most tension between buyers and sellers. Having an attorney review these agreements protects you from unexpected losses.

Both LOIs and deposit agreements can contain terms that appear minor but carry significant consequences. Some common red flags include:

• Vague exclusivity clauses that restrict sellers for too long.
• Non-refundable deposits that don’t account for legitimate buyer concerns uncovered during due diligence.
• Unrealistic timelines for financing or transition.
• Overly broad confidentiality provisions that can limit your future business opportunities.

Spotting these issues early helps you avoid costly disputes and wasted time.

Whether you’re buying or selling, you don’t have to accept every proposed term as-is. Some practical tips include:

• Buyers: Push for refundable deposits that protect you if due diligence reveals problems with the practice.
• Sellers: Tie non-refundable deposits to specific milestones (like clearing financing approval) rather than demanding them upfront.
• Both sides: Keep exclusivity periods reasonable. Too short can stall negotiations, but too long can create unnecessary risk.
• Clarity over assumptions: Spell out terms like transition support, equipment condition, and patient record handling in writing rather than leaving them implied.

We work with you to craft fair, balanced agreements that protect your investment and keep the deal moving smoothly.