Letter of Intent
(Joint Venture, Majority/Minority)

Summary

This letter of intent may be used in a potential joint venture transaction formed by two members, one of whom that will own a majority interest in the LLC and one of whom that will own a minority interest. This template contains practical guidance, drafting notes, alternate clauses, and optional clauses. Letters of intent (LOIs) summarize the intended terms and conditions of a potential transaction. They are typically drafted and signed early in the negotiation process and are useful in focusing the parties' attention on key issues that may arise in the proposed joint venture. Letters of intent are typically non-binding unless all or a portion of the LOI expressly states that the parties intend for the LOI to be binding. LOIs that do not have a specific section dedicated to binding provisions should, at a minimum, explicitly state that all portions of the LOI are intended to be nonbinding. Otherwise, the parties may be at risk for creating unintentionally binding obligations on the parties. In keeping with best practices, this LOI is divided into a binding section and a non-binding section in order to minimize the risk of unintentionally binding provisions. This template assumes that the minority holder has a substantial minority interest and thus has negotiating power. The LOI contains non-binding language intending the LLC to be manager-managed. When drafting an LLC agreement for a joint venture, counsel should consider, among other things, whether the management should be structured as manager/member managed with one manager in control; manager/member managed with joint control; manager/member managed with one member in control subject to certain major decision rights; or a board of managers. The following process map provides an overview of key considerations that impact the planning and structuring of a joint venture. For further information on joint ventures, see generally Preliminary Agreements in Joint Ventures — Letters of Intent and Term Sheets and Joint Venture Resource Kit.