A structured LOI framework built for accounting practice acquisitions — covering client retention earnouts, staff transition terms, SBA financing conditions, and the deal-specific language that protects buyers in professional services transactions.
Acquiring a business-focused CPA firm is fundamentally different from buying a product company or retail business. The asset you are purchasing — recurring client relationships built on trust, professional credentials, and years of institutional knowledge — is invisible on a balance sheet and can walk out the door if the transition is mishandled. A well-drafted Letter of Intent is your first and most important opportunity to define how that risk is allocated between buyer and seller. For CPA firm acquisitions in the $1M–$5M revenue range, the LOI must address four structural realities unique to this industry: revenue-based earnouts tied to client retention thresholds, seller transition commitments that extend 12–24 months post-close, staff retention provisions for licensed CPAs and enrolled agents who carry client relationships, and SBA 7(a) financing contingencies that govern deal timing and equity requirements. This guide walks through each section of a CPA firm LOI, provides realistic example language drawn from lower middle market accounting transactions, and identifies the negotiation leverage points that most first-time buyers miss. Whether you are an experienced CPA acquiring your first independent practice, or a regional firm executing a buy-and-build strategy, this template gives you a defensible starting framework that reflects how these deals actually close.
Find CPA Firm (Business Tax Focus) Businesses to AcquireParties and Practice Identification
Identifies the buyer entity, seller entity or individual, and the specific CPA practice being acquired. For sole proprietor firms, this section must clarify whether the acquisition is structured as an asset purchase or entity purchase, and must reference the practice's DBA name, state of licensure, and primary service lines.
Example Language
This Letter of Intent is entered into as of [Date] between [Buyer Name or Entity] ('Buyer') and [Seller Name or Entity] ('Seller'), with respect to the proposed acquisition of substantially all assets of [Firm Name], a [State] CPA practice specializing in business tax compliance, planning, and advisory services for small and mid-sized entities ('the Practice'). The Practice operates under EIN [XXXXXXX] and holds an active firm license issued by the [State] Board of Accountancy. The transaction is contemplated as an asset purchase, with Buyer acquiring client relationships, goodwill, work-in-progress, technology systems, and assignable engagement letters, but excluding accounts receivable unless otherwise agreed.
💡 Sellers operating as S-corps or single-member LLCs will frequently push for an entity purchase to access capital gains treatment on goodwill. Buyers should resist this when possible due to the step-up in basis benefits of an asset purchase, which directly impacts depreciation of acquired intangibles under IRC Section 197. If the seller insists on an entity purchase, model the tax cost differential and negotiate a price adjustment. Always confirm the firm license is active and in good standing with the state board before executing the LOI — a lapsed or conditionally renewed license can invalidate SBA loan eligibility.
Purchase Price and Valuation Basis
States the proposed total purchase price, the valuation methodology used to arrive at that figure, and the revenue or earnings baseline on which it is calculated. CPA firms in the business tax segment typically trade at 0.9x–1.4x gross revenue or 3x–5x SDE, depending on client concentration, revenue mix, and staff depth.
Example Language
Buyer proposes a total purchase price of $[Amount], representing approximately [X.X]x the Practice's trailing twelve-month gross revenue of $[Amount] for the period ending [Date], as reported in the Practice's compiled financial statements. This valuation reflects the Practice's recurring business entity client base, [X]% client retention rate over the trailing three years, and the presence of [X] licensed staff members expected to remain post-close. The purchase price is subject to adjustment based on findings during the due diligence period, including but not limited to material changes in client revenue, staff departures, or discovery of unresolved regulatory or malpractice matters.
💡 Revenue multiples are the dominant valuation currency in accounting practice M&A, but buyers should anchor internal underwriting to SDE or EBITDA multiples to ensure debt service coverage under SBA financing. A firm at $1.5M revenue with a 1.2x multiple implies an $1.8M purchase price — at 3x SDE that implies $600K in normalized earnings, which may or may not support loan service at prevailing SBA rates. Push for a price adjustment mechanism tied to verified trailing revenue, not projections, and resist seller attempts to include work-in-progress valuations that inflate the baseline.
Transaction Structure and Consideration
Details the proposed payment structure including cash at close, seller carry note, earnout provisions, and any SBA financing contingency. CPA firm deals frequently involve three layers of consideration: a cash component funded by SBA loan proceeds, a seller note representing 20–30% of purchase price, and a revenue-based earnout spanning 2–3 years.
Example Language
The proposed consideration structure is as follows: (i) Cash at Closing of $[Amount], representing approximately [X]% of the total purchase price, to be funded through an SBA 7(a) loan for which Buyer has received a preliminary indication of interest from [Lender Name]; (ii) Seller Carry Note of $[Amount] representing [X]% of the purchase price, bearing interest at [X]% per annum with a [5]-year term, subordinated to the SBA senior lien, with payments contingent on the Practice retaining no less than [85]% of trailing twelve-month gross revenue through the first 24 months post-close; and (iii) Earnout of up to $[Amount] payable over [24–36] months, calculated as [X]% of gross revenue collected from clients on the closing date client list who remain active during the earnout measurement period, with earnout payments made [quarterly/annually].
💡 The earnout structure is the most heavily negotiated element in CPA firm transactions and the most common source of post-close disputes. Buyers should define 'active client' with precision — specify that a client counts as retained only if they have paid invoices totaling at least [X]% of their prior-year billing within the measurement period. Sellers will push for broad definitions and short measurement windows; buyers should push for narrow definitions and 24–36 month windows. The seller carry note contingency on client retention is a powerful alignment tool — it gives sellers a direct financial incentive to cooperate fully during transition rather than passively handing over a client list.
Due Diligence Period and Access
Establishes the length of the due diligence period, the categories of information the buyer will review, and the confidentiality obligations governing access to sensitive client and staff data. CPA firm due diligence typically requires 45–90 days given the complexity of client list analysis and staff retention assessment.
Example Language
Buyer shall have [60] calendar days from the execution of this Letter of Intent ('Due Diligence Period') to complete its review of the Practice. Seller agrees to provide Buyer with reasonable access to: (i) three years of compiled or reviewed financial statements and tax returns for the Practice entity; (ii) a de-identified client list showing revenue per client, service type, years of engagement, and billing rates for the trailing 36 months; (iii) copies of all current engagement letters and confirmation of assignability; (iv) staff credentials, compensation, tenure, and any existing employment, non-solicitation, or non-compete agreements; (v) technology systems documentation including tax software licenses, practice management platforms, and data storage protocols; and (vi) documentation of any open malpractice claims, IRS representation matters, or state board disciplinary proceedings. Client identities may be disclosed only after execution of a mutual NDA satisfactory to both parties.
💡 Sellers are understandably protective of their client list — it is the crown jewel of the business. Negotiate for tiered disclosure: aggregate client metrics and concentration analysis first, with full identified client list disclosed only after the LOI is executed and mutual NDA is in place. Request three years of QuickBooks or billing system data exports, not just summary financials — this allows independent verification of revenue per client trends and catch-all billing arrangements that inflate headline revenue. Pay particular attention to clients billed under retainer arrangements that may not represent true recurring relationships.
Seller Transition and Non-Compete Provisions
Defines the seller's post-close involvement in the practice, including the duration of the transition period, compensation structure during transition, and the geographic and temporal scope of any non-compete and non-solicitation agreements.
Example Language
Seller agrees to remain actively engaged in the Practice for a transition period of no less than [18] months following the Closing Date ('Transition Period'), during which Seller will: (i) personally introduce Buyer to all business entity clients representing more than $[5,000] in annual billings; (ii) co-sign client communications for the first [6] months; (iii) provide up to [20] hours per week of advisory support to Buyer and staff at a compensation rate of $[X] per hour or as otherwise agreed. Following the Transition Period, Seller agrees to a non-compete and non-solicitation covenant for a period of [3] years within [50] miles of the Practice's primary office location, prohibiting Seller from directly or indirectly providing tax, accounting, or advisory services to any client or former client of the Practice.
💡 Transition length and non-compete enforceability are the two most contested provisions in CPA firm LOIs. Many sellers resist 18–24 month commitments, particularly those selling due to burnout. Buyers must hold firm on transition length when the seller is the primary client contact — no transition period is the single greatest predictor of client attrition. On non-competes, note that some states including California have strict limitations on enforcement; engage local counsel before finalizing scope. Consider structuring transition compensation as a monthly retainer with milestone-based bonuses tied to client introduction completion rates to keep seller engagement high.
Staff Retention and Employment Terms
Addresses the buyer's intent regarding existing staff, outlines any key employee retention commitments, and establishes representations regarding staff employment agreements and non-solicitation obligations currently in place.
Example Language
Buyer intends to offer continued employment to all current Practice staff as of the Closing Date on terms no less favorable than their current compensation and benefits arrangements for a minimum of [12] months post-close. Seller represents and warrants that: (i) all staff members are employed at-will or under written agreements, copies of which will be provided during due diligence; (ii) all staff have executed confidentiality and non-solicitation agreements prohibiting solicitation of Practice clients for a minimum of [24] months following any separation; and (iii) no staff member has provided notice of resignation or indicated intent to depart in connection with the transaction as of the LOI date. Buyer reserves the right to negotiate individual retention agreements with key licensed staff, including [CPA/EA credential holders], during the due diligence period.
💡 Staff retention risk is frequently underestimated by first-time accounting firm buyers. Licensed staff with client relationships represent transferable goodwill — and in smaller firms, a single departing senior accountant can take meaningful revenue with them. Request direct introductions to key staff during due diligence, framed as a 'get to know you' meeting rather than a retention negotiation, which requires seller consent given confidentiality concerns. Confirm that non-solicitation agreements are properly drafted, signed, and cover both client solicitation and staff-to-staff poaching. If critical staff have no non-solicitation agreements in place, treat this as a material risk requiring either a price reduction or individual retention bonuses funded at close.
Financing Contingency
States the buyer's intent to use SBA 7(a) financing and establishes the LOI's contingency on loan approval, including the expected equity injection amount, lender engagement status, and timeline for obtaining a commitment letter.
Example Language
This Letter of Intent is contingent upon Buyer obtaining a commitment for SBA 7(a) financing in an amount sufficient to fund the cash portion of the purchase price. Buyer has engaged [Lender Name], an SBA Preferred Lender, and anticipates a Buyer equity injection of not less than [10–15]% of the total acquisition cost, inclusive of working capital. Buyer commits to submitting a complete SBA loan application within [15] business days of LOI execution and to provide Seller with written lender status updates every [14] days during the Due Diligence Period. In the event Buyer is unable to obtain SBA financing commitment within [45] days of LOI execution, either party may terminate this Letter of Intent without penalty, and any good-faith deposit shall be returned to Buyer in full.
💡 SBA lenders underwriting CPA firm acquisitions will scrutinize client concentration closely — a single client representing more than 20% of revenue may trigger a loan condition requiring that client to execute a client acknowledgment or subordination letter, which sellers find uncomfortable and clients find alarming. Address this risk early by confirming with your lender whether client concentration will require any third-party acknowledgments, and negotiate with the seller to establish a fallback structure if the SBA loan amount is reduced due to concentration risk. SBA lenders will also require the seller note to be on full standby for the first 24 months; ensure the seller is aware of this requirement before LOI execution.
Exclusivity and No-Shop Period
Establishes a period during which the seller agrees not to solicit, negotiate, or accept offers from other potential buyers, giving the buyer protected time to complete due diligence and secure financing.
Example Language
In consideration of Buyer's commitment to expend time and resources in conducting due diligence and pursuing SBA financing, Seller agrees to an exclusive no-shop period of [60] calendar days from the date of LOI execution ('Exclusivity Period'). During the Exclusivity Period, Seller and Seller's agents will not solicit, initiate, encourage, or participate in discussions with any other party regarding a potential sale, merger, or transfer of the Practice. Seller will promptly notify Buyer in writing of any unsolicited inquiries received during the Exclusivity Period. The Exclusivity Period may be extended by mutual written agreement if due diligence or financing timelines require additional time.
💡 60 days is the minimum viable exclusivity period for an SBA-financed CPA firm acquisition given lender processing timelines. Push for 75–90 days if possible, particularly if the transaction requires SBA appraisal of intangible assets, which some lenders require for goodwill-heavy professional service acquisitions. Sellers who have been actively marketed by a broker may resist long exclusivity periods if other buyers are in the pipeline — in these cases, a shorter initial exclusivity window with an automatic extension trigger tied to financing milestone achievement is a workable compromise.
Conditions to Closing
Lists the material conditions that must be satisfied before the transaction can proceed to a definitive purchase agreement and closing, including due diligence completion, regulatory approvals, staff retention confirmations, and SBA loan funding.
Example Language
The obligations of both parties to proceed to a definitive Asset Purchase Agreement are conditioned upon the satisfaction of the following conditions: (i) completion of Buyer's due diligence review to Buyer's reasonable satisfaction; (ii) receipt of a written SBA 7(a) loan commitment from Buyer's lender; (iii) confirmation that no fewer than [90]% of Practice staff by headcount, including all licensed CPA and EA staff, have accepted Buyer's employment offers; (iv) no material adverse change in the Practice's client base, revenue, or operations between LOI execution and closing; (v) receipt of any required state board of accountancy consents or notifications related to the change in firm ownership; (vi) execution of individual transition and non-compete agreements with Seller in form and substance acceptable to Buyer; and (vii) assignment of all material client engagement letters to Buyer or execution of new engagement letters with key clients as required by state professional conduct rules.
💡 The state board notification or consent requirement is frequently overlooked in early-stage LOI drafting and can become a closing timeline issue. Most states require notification of a CPA firm ownership change to the state board, and some require affirmative approval before the transfer of the firm license. Confirm your state's specific requirements with an attorney experienced in CPA firm transactions before executing the LOI, as this timeline must be built into the conditions to closing. Also note that engagement letter assignment may require client consent under state professional conduct rules — build a mechanism for client notification and consent into the closing conditions rather than treating it as a post-close administrative task.
Client Retention Earnout Threshold
The percentage of trailing revenue that must be retained from the closing date client list to trigger full earnout payments is the single most important economic term in a CPA firm LOI. Buyers should target an 85–90% retention threshold; sellers will push for 75–80%. The definition of 'retained' matters as much as the percentage — insist on payment-based definitions rather than engagement-letter-based definitions, since clients who sign but do not pay are not retained for practical purposes.
Seller Transition Period Length and Compensation
Buyers need 18–24 months of active seller involvement in a business-focused CPA firm where the owner is the primary client relationship holder. Sellers frequently push for 6–12 months, particularly when burnout is the exit motivation. Negotiate transition compensation as a structured monthly retainer with milestone bonuses tied to client introduction completion, creating financial incentives for sellers to engage fully rather than check the box on contractual minimums.
Seller Note Contingency and Standby Period
SBA lenders require seller notes to be on full standby — no payments of principal or interest — for the first 24 months post-close. Sellers who are counting on seller note cash flow to fund retirement must understand this requirement before the LOI is signed. The contingency trigger for the seller note, typically tied to client retention milestones, should be explicitly linked to measurable revenue metrics verified by the Practice's billing system, not self-reported by the buyer.
Non-Compete Geographic Scope and Duration
A 3-year, 50-mile non-compete is a reasonable starting position for a sole practitioner CPA firm acquisition. Sellers in rural or suburban markets may push back on the mileage radius as effectively prohibiting them from practicing their profession. Buyers in competitive urban markets may need to expand the radius. Consult local counsel on enforceability — in states with restrictive non-compete laws, a well-drafted non-solicitation agreement covering the client list is often more practically valuable than a broad geographic non-compete.
Material Adverse Change Definition
Define what constitutes a material adverse change (MAC) triggering Buyer's right to renegotiate price or terminate the LOI. For CPA firms, a MAC should include: loss of any single client representing more than 10% of revenue, departure of any licensed CPA or EA staff member during due diligence, discovery of an unresolved malpractice claim or state board proceeding, or a revenue decline of more than 15% in the period between LOI execution and closing compared to the prior-year period. Sellers will push for narrower MAC definitions — this is a point worth holding firm on given the relationship-driven fragility of the asset.
Work-in-Progress and Accounts Receivable Treatment
Whether WIP and A/R are included in the purchase price or excluded as seller-retained assets is a significant economic variable in CPA firm transactions. Tax season acquisitions may involve substantial WIP for work already performed but not yet billed. The most common approach is to exclude A/R from the asset purchase (seller retains and collects) while including WIP at a negotiated percentage of billable value. Buyers should independently verify WIP balances through billing system access, as seller estimates of billable WIP tend to be optimistic.
Find CPA Firm (Business Tax Focus) Businesses to Acquire
Enough information to write a strong LOI on day one — free to join.
Most LOIs in CPA firm acquisitions are intentionally non-binding on the core economic terms — purchase price, structure, and earnout — but are binding on specific provisions including exclusivity, confidentiality, and cost allocation. This means either party can technically walk away before the definitive purchase agreement is signed, but the exclusivity and no-shop provisions are enforceable and carry real consequences if violated. Have an attorney experienced in professional service firm M&A review the LOI before execution to confirm which provisions carry binding effect under your state's law.
Plan for 60–90 days of due diligence for a business-focused CPA firm in the $1M–$5M revenue range. Client list analysis alone — reviewing three years of revenue per client, identifying concentration risks, and verifying engagement letter status — typically requires 2–3 weeks of focused effort. Layering in staff assessments, technology audits, and SBA lender underwriting requirements means 60 days is a realistic minimum. If the firm has complex revenue streams including payroll, bookkeeping, or advisory services in addition to tax compliance, budget for the full 90 days.
The most common earnout structure in business tax CPA firm acquisitions ties a portion of the purchase price — typically 20–35% — to client revenue retention over 24–36 months post-close. The earnout is calculated by measuring gross revenue collected from clients who were active on the closing date client list during each measurement period, then applying an earnout payment formula if retention exceeds a defined threshold such as 85% of trailing revenue. Earnout payments are typically made annually or quarterly. Buyers should ensure the earnout formula measures collected revenue, not billed revenue, to account for collection risk on retained clients.
Yes. SBA 7(a) lenders regularly finance CPA firm acquisitions where the vast majority of value is in intangible goodwill and client relationships. The SBA allows intangible assets including customer relationships and goodwill to be financed under the 7(a) program, though lenders may require a formal business appraisal when intangibles represent a significant portion of the loan collateral. Expect a 10–20% equity injection requirement, a seller note representing 10–20% of the purchase price on standby for the first 24 months, and lender scrutiny of client concentration — firms with a single client exceeding 20% of revenue may face loan conditions or reduced proceeds.
Client attrition protection starts in the LOI by structuring the earnout and seller note contingencies to keep the seller financially invested in a successful transition. Beyond deal structure, the most effective attrition mitigation strategies are: (1) requiring the seller to personally introduce you to every client representing more than $5,000 in annual billings within the first 90 days, ideally in person or by video; (2) sending a co-signed client communication letter from both seller and buyer at close explaining the transition positively and emphasizing continuity of service; (3) retaining all key licensed staff who carry client relationships, with written retention agreements; and (4) delivering consistent service quality through the first full tax season under your ownership, which is when clients form their judgment about whether to stay.
A seller who refuses any non-compete significantly increases buyer risk and should trigger either a price reduction or a deal termination. Without a non-compete, there is nothing legally preventing the seller from opening a competing practice, contacting former clients, or referring clients to competitors immediately after receiving their purchase proceeds. In practice, non-solicitation agreements covering the specific client list are often more enforceable and more practically useful than broad geographic non-competes, particularly in states that restrict non-compete enforcement. If a seller resists a non-compete but accepts a narrowly tailored non-solicitation covering the transferred client list for 3–5 years, that may represent an acceptable compromise depending on the seller's stated post-close plans.
In most lower middle market CPA firm acquisitions, accounts receivable are excluded from the asset purchase and retained by the seller to collect post-close. This is the cleaner structure because A/R is tied to work the seller performed, the seller has existing client relationships that make collection more efficient, and including A/R complicates the SBA loan collateral analysis. However, if the seller has a large outstanding A/R balance and you are concerned about collection that impacts client relationships, you can negotiate a discounted A/R purchase at a percentage of face value, with a true-up mechanism if actual collections differ materially from the purchased amount.
More CPA Firm (Business Tax Focus) Guides
More LOI Templates
Get enough diligence data to write a confident LOI from day one.
Create your free accountNo credit card required
For Buyers
For Sellers