When Sharon Toerek talks about legal readiness for agency transactions, she doesn't start with term sheets or purchase agreements. She starts with a question that stops most founders cold.
Do you know where your client contracts are right now?
Not whether they're well-drafted. Not whether they're assignable. Just whether you can locate them. And in her experience handling agency transactions, buy side, sell side, everything in between, a surprising number of founders can't answer that with confidence.
That's the entry point to one of the most practical conversations I've had on this show. Sharon is the founder of Legal + Creative, a law firm that works exclusively with agencies and creative businesses in the marketing space. She advises agency owners on the legal infrastructure that either accelerates a deal, complicates one, or quietly kills it before either party realizes what happened.
I sat down with Sharon to go deep on three things every agency owner needs to understand: the state of your client contracts, the value of your intellectual property, and what AI is doing to both — right now, in transactions, and in the day-to-day operations of every agency that hasn't caught up yet.
The Problem Nobody Wants to Call a Problem
Agency owners don't love engaging with legal. Sharon says it plainly and without judgment. Unless something is on fire, the instinct is to look the other way. Preventative legal work doesn't feel urgent. It doesn't feel like it moves the needle on revenue.
Until you're in a transaction. At which point every corner you cut, every contract you let slide, every handshake deal you didn't bother documenting becomes a variable that either costs you money, costs you time, or costs you the deal entirely.
The irony, she points out, is that the same things that make an agency valuable in a transaction are the same things that make it operationally strong in everyday life. Getting your legal house in order isn't a pre-sale exercise. It's just good business. The transaction just has a way of exposing whether you've been doing it.
Your Contracts Are the Asset. Treat Them Like One.
The most tangible thing a buyer acquires in an agency deal is the book of client business. Not the founder's relationships. Not the brand reputation. Not the way the team works. Those things matter, but what transfers in a transaction — what has definable, quantifiable value — is the contractual relationship with each client.
Which means the state of those contracts is the state of your asset.
Sharon's starting point for any agency approaching a transaction is simple: do a full review of every client agreement you have. Know when they expire. Know what the payment terms are. Know whether they're assignable, because if a buyer can't step into your shoes with your best clients without renegotiating from scratch, that uncertainty is priced into the offer.
What she sees consistently would surprise most people. Agencies that have been operating for 10, 15, 20 years often have a cocktail of different agreements: their own templates from various eras, contracts forced on them by the client's procurement team, and, still, in 2026, handshake deals with some of their longest-standing relationships. The longest clients are sometimes the least documented. That's not a relationship problem. It's a transaction problem.
The fix isn't complicated. It's a spreadsheet and a folder. Every active client, every contract, every material term. If it doesn't exist, create it. If it's outdated, update it. If it's not assignable, that's a conversation to have with the client before a buyer shows up, not after.
Messy Contracts Don't Have to Kill the Deal
One of the most useful things Sharon said in our conversation was this: a target agency with disorganized contracts isn't automatically off the table. But it changes the conversation in three specific ways.
It takes longer. Diligence has to go deeper. More questions have to get answered before a buyer can make a confident offer, and more work has to get done after the offer before the deal can close. That time has a cost.
It gets more expensive. Professional fees on both sides rise when the foundation isn't clean. That cost usually ends up getting priced into the deal structure one way or another.
And it can affect valuation. If a buyer can't confirm which relationships transfer cleanly, they'll discount the uncertainty even when the underlying client relationships are strong.
The better path for buyers approaching an unsophisticated seller is to treat it as a conversation, not a red flag. Ask about the history of the relationship. How long have they worked together? How was the contract process, was the client reasonable, or was it ten rounds with procurement? Those conversations surface the information a spreadsheet can't. And they create a foundation for asking the seller to get things papered before close, which both protects the buyer and improves the asset value for the seller.
As Sharon puts it: fix the plumbing and put the new roof on before we take title. That framing should come from the buyer early, not surface as a retrade at the end.
IP Is the Asset Most Agencies Don't Know They Have
Beyond the client book, agencies are sitting on intellectual property they've built over years: methodologies, processes, proprietary frameworks, content libraries, software tools, brand systems, and most of them have never taken steps to protect it in a way that makes it transactable.
Sharon uses a triangle to think about agency IP: brand, content, and transactions. Brand is how you've protected the expressions of who you are: trademarks, logos, naming. Content is everything you've created to serve clients, the deliverable infrastructure, the process documentation, the proprietary tools. Transactions are the agreements through which you've defined what you own versus what you've transferred to clients as work for hire.
When all three are in order, IP can materially move the needle on valuation. When they're not, that value just doesn't show up in the deal, even if the founder knows it exists.
The most common reason agencies don't protect their IP isn't cost. It's that they don't think of themselves as IP creators. They've spent their careers building things for clients, and the instinct is to see everything they produce as belonging to someone else. The result is decades of proprietary thinking left in the dusty corners of their operations, valuable to the right buyer, unquantifiable because it was never documented or protected.
There's also a structural issue most founders miss: if you're using freelancers or contractors to create anything you intend to own, you need a written agreement that explicitly assigns ownership to you. Without it, you may have a license, not ownership. And you can't sell something you don't own.
The Carve-Out Nobody Talks About
Here's something Sharon raised that I want to flag specifically for every founder who has spent years building methodologies or proprietary approaches: you don't have to sell your IP when you sell your agency.
If a buyer is primarily acquiring your client book: the relationships, the recurring revenue, the delivery team, they may not need or want your underlying IP. That creates an option. Sell the agency. License the IP to the buyer. Keep the underlying asset.
What that enables is a second chapter that doesn't start from zero. Founders who retain their IP can continue to advise, consult, build content businesses, and create revenue from what they've spent years developing, outside the operating agency they've just sold. That optionality is real. But it only exists if the IP was documented and protected in the first place.
Get there early. Trademark registration takes about a year from filing. Copyright protections take six to eight months. These aren't things you do in the 90 days before close.
AI: The Legal Landmine Most Agencies Are Standing On
The last third of our conversation was the one I want every agency owner — buyer and seller alike — to sit with carefully.
Most agencies using AI tools in their work have not addressed that use in their client agreements. They haven't had explicit conversations with clients about which deliverables involve AI-generated content. They haven't allocated responsibility for what happens if that output infringes on a third party's intellectual property. And in many cases, they're feeding client business intelligence: strategy documents, product launch plans, competitive data, into AI platforms that don't carry the same confidentiality protections their NDAs do.
Sharon is direct about what this means under current copyright law in the United States: anything generated by AI isn't ownable by the agency, the client, or anyone else right now. That needs to be reflected in your agreements. Clients need to know it. And both parties need to understand who carries the liability if something goes wrong.
The indemnification issue is particularly sharp. The major AI platforms have made clear they will not protect you if their output creates a copyright problem downstream. That exposure lives with the agency. Which means if you're creating deliverables with AI tools and you haven't contractually addressed it with your clients, you're carrying a risk that neither party has formally acknowledged.
From a transaction standpoint, Sharon treats AI policy, or the absence of one, as a signal. An agency without documented internal AI policies, without AI language in their client and contractor agreements, without any visible system for managing how these tools are used, is showing you something about how they run their operations broadly. It's a breadcrumb. And it usually leads somewhere.
What to Do If You're Listening to This Right Now
Sharon's framework isn't complicated. It's just not common.
Start with your client contracts. Pull them all. Build the spreadsheet. Know what you have, when it expires, what it allows, and whether it's assignable. This is the work that pays for itself before you ever sit across from a buyer.
Protect your brand. If your agency name and your methodologies carry real value, trademark them. This takes a year. The clock starts when you file, not when you decide to.
Own your content. If contractors or freelancers helped build what you call proprietary, go back and make sure the ownership language in those agreements is clear. If it isn't, fix it before someone else asks the question.
Build an AI policy and put it in your agreements. Client agreements, employment agreements, independent contractor agreements. Not because it's a regulatory requirement, but because the absence of it is now a visible gap that sophisticated buyers and clients will notice.
And do all of this now. Not because a transaction is imminent. Because the legal foundation that makes your agency valuable in a deal is the same foundation that makes it run better tomorrow.
The Bottom Line
The agencies that transact well — that command stronger valuations, close faster, and leave both parties satisfied — aren't the ones that scrambled to clean things up when a buyer showed interest. They're the ones that built clean from the beginning.
Sharon has seen what happens on both sides. The sellers who created options for themselves by doing the work early. The sellers who watched money get left on the table because agreements were missing, IP was unprotected, and AI exposure was unaddressed.
The legal side of your agency isn't a defensive cost. It's a value creation engine, if you treat it that way early enough for it to matter.
Listen to the Full Conversation
Hear Sharon Toerek, founder of Legal + Creative, walk through the legal infrastructure that makes or breaks agency transactions: client contract readiness, IP protection strategy, the carve-out opportunity most founders never consider, and what AI is doing to deals right now: for buyers and sellers who haven't caught up yet.
