LLC Formation during LOI process

June 06, 2025

by a searcher from Carleton University in Nepean, Ottawa, Ontario, Canada

I'm in the process of submitting an LOI and was wondering if it's common (and acceptable) to reference a "to-be-formed" LLC in the LOI, and only go ahead with forming the legal entity after the LOI is accepted and due diligence begins? My thinking is that waiting would avoid unnecessary administrative work and filing costs in case the deal doesn't move forward. But I want to be sure this won’t raise red flags with the seller or create any legal complications later.

Reply by a professional
from Pace University in New York, NY, USA

I've actually done this quite a few times, including drafting purchase agreements before the entity was even formed—so it's definitely not unusual. That said, my question to you is this: if you're serious about buying a business—whether it's this one or another—why wait to form the entity? You're going to need it eventually, so it makes sense to go ahead and set it up now. Doing so can streamline the process and avoid unnecessary delays later. If you need to chat DM me at redacted

Reply by a searcher
from Northwestern University in Chicago, IL, USA

I took this exact approach with a recently signed LOI. My lawyer said it was fairly common. And now that it's been signed we are setting up the entities now. Good luck!

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