LLC Formation during LOI process

searcher profile

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.
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commentor profile
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
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Reply by a professional
from DePaul University in Detroit, MI, USA
I commonly see "John Doe, or an entity to be formed (the 'Purchaser')". On early deal documents.
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