An acquirer emails, the first call goes well, and a week later a letter of intent (LOI) arrives with a number that makes the last five years feel worth it. Most of it says “non-binding,” so signing feels like a handshake.

But does this really indicate no commitment from the buyer? In reality, the LOI sets the price you collect, the structure the IRS taxes, and the promises you’re liable for after closing.

So do you actually need a lawyer to sell your business? Legally, no; practically, yes, and before you sign the LOI. I’m a two-time software founder turned acquisitions lawyer, and here’s what that looks like.

Is a Lawyer Legally Required to Sell a Business?

No. You can sign a letter of intent and a purchase agreement yourself, and some owners of very small businesses do.

The better question is what happens on the other side of the table. A serious acquirer, whether strategic or private equity-backed, runs deals like yours many times a year with experienced deal counsel.

You will probably sell a company once or twice in your life. If you show up without a lawyer, you are negotiating the largest transaction of your career against a team that wrote the first draft in its own favor.

Why the LOI Is When You Need a Lawyer First

Founders tend to call a lawyer when the purchase agreement arrives. In my experience, by then the deal is already about 90% done. Every number and every right in the LOI becomes the starting point the buyer’s lawyers draft from, and walking a term back later costs you goodwill and time you may not have.

The Binding Parts of a Non-Binding LOI

Most of an LOI is non-binding, but a few provisions bind the moment you sign. The big one is exclusivity, sometimes called a no-shop clause, which stops you from talking to any other buyer for a set period. Confidentiality binds too, and so does a breakup fee if the LOI includes one.

Exclusivity is where sellers lose their position. If the buyer moves slowly while you’re locked in, other interested parties cool off, and your only alternative to a bad term is no deal at all. I push to keep that window as short as the buyer will accept and to keep other conversations warm until the day it’s signed.

Headline Price Versus Cash at Closing

The price is the number they show you. The terms are where the money quietly leaks. Before you react to the headline figure, a lawyer reads the LOI for four things that shrink it:

• ●Escrow or holdback. A portion of the price the buyer keeps back after closing to cover claims against you.
• ●Working capital adjustment. A target for current assets minus current liabilities; if you close below it, the gap comes out of your price. In SaaS, prepaid annual subscriptions create deferred revenue, a liability the buyer still has to service. On one deal where I represented the buyer, the working capital adjustment came to well over $500,000.
• ●Earnout. Part of the stated purchase price to be paid, but only if the business hits certain targets after you no longer control it. (The problem is you have no control over the success of the business once it’s run by the buyer.)
• ●Form of payment. Cash is final. Stock in a private buyer sits behind that company’s investors and their liquidation preferences, so its real value can be much lower than the LOI suggests.

Watch for vague phrases such as “standard escrow and indemnity terms.” There is no such thing as standard. That language lets the buyer fill in aggressive terms after you’ve signed exclusivity and lost your options.

How Deal Structure Changes Your Tax Bill and Your Liability

The LOI also names the structure, which decides how the deal gets taxed and what stays behind with you.

Stock Sale Versus Asset Sale

In a stock sale, the buyer acquires your shares and owns the whole company: all of the assets and any liabilities. In an asset sale, the buyer “cherry picks” the assets it wants, and your old entity remains in existence leaving you with the assets the buyer doesn’t want and any liabilities not assumed by the buyer. For more on how buyers weigh the two, see our breakdown of a stock purchase or asset purchase.

An asset sale can still be the right call when:

• ●You have one interested buyer, and that buyer will only buy assets.
• ●The company is in distress, and an asset deal is the only one on the table.

In a healthy startup sale, I usually push for a stock sale or merger. The buyer gets the same protection through reps and indemnification, and you aren’t left with a shell company to clean up.

QSBS and Why Structure Matters

Qualified Small Business Stock (QSBS) can exclude a large share of a founder’s gain from federal income tax. It’s a federal tax benefit designed to stimulate small business creation and growth, and level the playing field with LLCs and other legal entity forms.

Under Section 1202 of the Internal Revenue Code, all or a portion of the gain when a holder other than a corporation sells or exchanges qualifying stock is excluded from federal income tax. Many states with income taxes continue to conform to the federal exclusion, including New York and New Jersey. However, California explicitly says the exclusion does not apply, so a taxpayer who qualifies for up to 100% federally is taxed on the full gain in California.

Three things to check before the LOI fixes the structure:

• ●Asset limit. The company had to stay under an aggregate gross assets limit up to the moment your stock was issued; for stock issued after July 4, 2025, that limit is $75 million.
• ●Where the gain lands. Structure determines whether your proceeds arrive as gain on your own stock or as money the corporation earned first.
• ●Your tax advisor. Run the QSBS question with your lawyer and your tax advisor together.

The Second Layer of Tax in a C-Corp Asset Sale

Here is how an asset sale by a C-Corp gets taxed, step by step:

1. 1The corporation sells and pays first. Federal corporate income tax is 21% of taxable income under Section 11.
2. 2You get taxed on the way out. When the company distributes what’s left to stockholders in a liquidation, the tax code treats that payment as an exchange for your stock, so the gain is taxed again at your level.
3. 3Both sides report the price split. When a business changes hands as a bundle of assets and goodwill is, or could be, part of the price, the IRS requires the buyer and seller each report the agreed allocation on Form 8594.

An allocation that favors the buyer’s tax position can cost you, so have your lawyer and tax advisor negotiate it before signing.

What a Sell-Side Lawyer Does From LOI to Closing

Once the LOI is signed, the work shifts to diligence and the purchase agreement. Here is the order it usually runs in.

1Diligence Prep Before the Buyer Looks

The buyer’s lawyers will request your formation documents, cap table, contracts, IP assignments, employment agreements, financials, tax returns, and litigation history. Anything missing becomes a reason to cut the price, so I start the data room before the LOI is signed. Two issues come up constantly in SaaS:

• ●Missing IP assignments from early engineers and contractors, which can let someone claim part of your product right before closing. We cover how acquirers spot these in managing IP risk in acquisitions.
• ●Customer contracts that can’t be assigned to a new owner without consent. On one deal, that issue led the buyer to demand a larger escrow and extend the seller’s exposure past the escrow period.

2Reps, Warranties, and Indemnification Caps

Reps and warranties are the factual statements you make about the business, and every one is a liability that survives closing. Your lawyer narrows them with knowledge and materiality qualifiers and keeps the company, rather than you personally, as the party making them. Then comes indemnification, the price of being wrong:

• ●Cap: your maximum total exposure.
• ●Basket: a deductible the buyer must exceed before claiming.
• ●Survival period: how long after closing a claim can be filed.
• ●Escrow: how much of the price is held back to pay claims.

I once reviewed a $25 million acquisition a founder had already agreed to verbally. The documents had an uncapped indemnification clause, an earnout with no seller protections, and disclosure schedules that were barely half finished.

3Disclosure Schedules That Protect You

Disclosure schedules list every exception to your reps, and a properly disclosed item is your legal protection. Think of disclosure schedules as your “insurance policy.”

If you disclose it, your buyer can’t come back and say they didn’t know about it and claim a breach of the reps and warranties. Therefore, the best advice is, if in doubt, disclose everything. Each entry should name the matter, the parties, and enough context to understand it, and stay accurate through closing.

4Board, Stockholder, and Regulatory Approvals

A sale that isn’t properly authorized can’t close. Here is what usually has to be in place:

• ●Stockholders. In Delaware, a sale of all or substantially all of a corporation’s assets needs board approval plus a vote of stockholders who together hold a majority of the outstanding voting shares, under section 271 of the Delaware General Corporation Law.
• ●Investors. Your charter or investor agreements may give them separate approval rights, and drag-along rights generally hold up only if you follow their notice and price terms exactly.
• ●Third parties. Consents from key customers, landlords, lenders, and licensors are usually closing conditions, and one missing consent can delay the deal.
• ●Antitrust. The FTC’s 2026 size-of-transaction threshold under the Hart-Scott-Rodino Act is $133.9 million, effective February 17, 2026; a deal above it may need a federal filing and waiting period, depending on the parties.

5Earnout Definitions and the Transition Services Agreement

An earnout is only ever worth the definitions around it. Revenue should be defined the way your business actually earns it, milestones should be things you still control, disputes should go to an independent accountant for resolution, and you want acceleration to an immediate payout of what you are owed if the buyer fires you or changes the business.

The transition services agreement (TSA) covers what you have to do for the buyer after closing to bring them up to speed running the business: scope, hours, duration, sometimes introductions to existing clients, a clean exit, and separate pay if it requires substantial time and effort on your part. For the operating side, our podcast episode on acquisition readiness for SaaS is a good companion.

When Selling Without a Lawyer Can Make Sense

There are honest cases where a full acquisitions engagement is more than you need. A very small, asset-light sale with a single owner, no investors, no employees, and a buyer paying cash at closing carries less risk than a venture-backed exit. If the legal fees would approach the sale price, a template agreement can be a reasonable trade.

Even then, pay for a limited review of the final agreement before you sign. Look hardest at any personal guarantee, any non-compete, how long your promises survive, and whether the buyer can come after you personally. One hour of review on those points costs far less than a claim after closing.

Once you have investors, employees, meaningful revenue, or an earnout, the math flips. Those are the deals where the documents decide how much of the price you actually keep.

How to Choose the Right Lawyer to Sell Your Business

The lawyer who helped you incorporate may not be the right one to sell the company. Here is the checklist I’d use if I were selling again.

Why experience matters in practice: on one recent sale where I represented the seller, the buyer’s first-time counsel produced a purchase agreement that had clearly been drafted with ChatGPT. Once the buyer brought in an experienced acquisitions lawyer, the agreement was rewritten, and a planned November close slipped to the end of February.

My own approach is fixed rates for routine work and hourly for the complex stuff. You can see how I structure acquisition and outside general counsel work on our legal services for SaaS founders page.

Hire a Lawyer Now If Any of These Apply

• ●You’ve received an LOI, an IOI, or a term sheet from a buyer, or expect one soon.
• ●You have outside investors, preferred stock, or a cap table with more than a handful of holders.
• ●Any part of the price is an earnout, seller note, rollover equity, or buyer stock.
• ●The buyer wants an asset deal, and you hold founder stock that could qualify for QSBS.
• ●You have employees, contractors, or former co-founders who wrote code or created IP.
• ●Your largest customer contracts require consent to assign.
• ●The buyer is asking you to sign a personal guarantee, non-compete, or employment agreement.

Frequently Asked Questions

Short answers to what founders ask me most when a sale is on the table.

Before You Sign the LOI

You don’t need a lawyer to sell a business in the legal sense. You need one because the buyer has one, and because the LOI quietly sets your price, your tax treatment, and your exposure after closing.

Pull together your cap table, top customer contracts, and IP assignments, then have an experienced deal lawyer read the LOI with you before your signature goes on it. Go out there and build something great, and when it’s time to sell, get the most return and profit from what you have built.