with Joshua Brinen
When Joshua Brinen gets a call from a founder who's just been approached by a buyer, the first thing he asks isn't about the offer. It's not about multiples or deal structure or whether the buyer is credible.
He wants to know how your business is set up. And the next question is one most founders haven't thought about since the day they filed the paperwork.
Are you an LLC taxed as an S-corp?
Because if you are, and you're thinking about selling, the entity you built your business inside of may be working against you in ways you've never had to think about. Until now.
Joshua is the founder of Brinen & Associates, a law firm that handles complex corporate, securities, and M&A transactions — buy side, sell side, and everything in between, with offices in the US and Europe. He's also the kind of attorney who will spend a Sunday afternoon on a call with a founder and tell them not to do the deal. Without billing for it.
I sat down with Joshua to go deep on three things every agency owner needs to understand before they ever sit across from a buyer: the legal entity you're sitting in, the tax exposure you're carrying, and how a sophisticated buyer can actually help you net more money from a deal you might not think you can afford to do.
Don't Fall in Love with the Deal
Before we got into structure or tax or any of the mechanics, Joshua said something that I want every founder to hear first.
Don't fall in love with the deal. It will not love you back.
He's seen it happen on both sides of the table. Founders who stayed in negotiations long past the point where the deal made sense for them, because they'd already told people it was happening, because they'd mentally spent the money, because they couldn't stomach the idea of walking away. That's what Joshua calls being pot committed. And in his experience, it's one of the most expensive mistakes a founder can make — on the buy side and the sell side alike.
The corollary to that is just as important: if you walk away, sometimes they come back. The deal that looked like it was falling apart occasionally comes back together on better terms, once the other party realizes you actually mean it. But only if you were willing to let it go in the first place.
The Entity Problem Nobody Warns You About
Here's where it gets technical, and where Joshua is most useful.
The default path for most agency founders was straightforward: form an LLC, elect S-corp tax status, run your paycheck through the same entity. It made sense. It reduced self-employment tax. It gave you a clean structure for pulling a salary. Plenty of CPAs recommended it, and for the early years of building a business, it works.
The problem surfaces when you try to sell.
S-corps come with a ceiling that most founders don't think about until a deal is on the table. No more than 100 shareholders. Shareholders must generally be US citizens. The entity can only be owned by natural persons — not corporations, not LLCs, not partnerships. Which means if your buyer is a private equity group, another agency, or any kind of institutional acquirer, they can't step into your entity without a structural workaround. That limitation gets priced in, or it kills the deal.
The better structure, if you'd built it from the start: a service LLC that handles your salary and benefits, sitting alongside the actual agency entity, connected by a management agreement. You get everything you wanted from the S-corp election — the paycheck, the deductions, the reduced self-employment tax — but the agency itself stays clean. Saleable. Transferable to a buyer who doesn't have to untangle your personal compensation structure from the thing they're trying to acquire.
If you're already in the wrong structure, it's not fatal. But it's work. And it's work best done now, not during diligence.
Buyers Want Assets. Sellers Want Equity. Here's Why It Matters.
This is one of the most consistent dynamics in M&A, and Joshua said it plainly: buyers almost always want to buy your assets, not your entity. Sellers almost always want the opposite.
Why? Because in an asset purchase, the buyer gets to choose what they take and what they leave. They don't inherit your liabilities, your legacy issues, your vendor disputes, or anything else that might be lurking inside the entity they haven't found yet. And from a tax perspective, they often get to step up the basis on what they acquire, which creates depreciation and amortization benefits going forward.
For the seller, an asset sale tends to be less clean. Different categories of assets get taxed at different rates. Contracts and client relationships may be treated as ordinary income rather than capital gain. The allocation of purchase price between asset categories becomes a negotiation within the negotiation — because where that money lands determines how much of it you keep.
The practical implication: in an asset sale, you want as much purchase price allocated toward goodwill and intangibles as possible, because those are taxed at capital gains rates. The more you can push toward that bucket, the better your after-tax outcome. And that negotiation starts well before you sit down to sign anything.
The Tax Math California Founders Need to Hear
If you're based in California and you're selling a business, you need to understand what you're actually walking away with.
Joshua's number for a California founder without any tax planning in place: roughly 40 cents on the dollar, on a good day. The combination of federal capital gains, California income tax, which doesn't treat long-term capital gains favorably the way the federal code does, and the way ordinary income treatment applies to certain asset categories means that a million-dollar sale can easily leave you with $400,000 to $500,000 in your pocket.
For a lot of founders, that math makes the deal feel like it doesn't work. And that's exactly where Joshua thinks buyers can play a more interesting role.
How a Smart Buyer Can Pay You More Without Paying More
This was the part of our conversation that I think changes how a lot of buyers approach the table.
Most buyers show up with a number. They negotiate. They close. Whatever the seller does with the proceeds is the seller's problem.
But there are mechanisms, ones Joshua was deliberate about not detailing publicly, because the right structure is genuinely facts-and-circumstances specific, that allow a seller to defer or substantially reduce what they owe in tax on a transaction. And a buyer who understands those mechanisms can use them as a tool.
The illustration is simple. If Joshua is about to pay a seller a million dollars and the seller is going to net $400,000 after California taxes, that seller isn't emotionally buying your offer as a million-dollar transaction. They're buying it as a $400,000 transaction. But if there's a structure that lets them net $700,000 or $800,000 on that same payment, or even slightly less, the deal math changes entirely. The seller feels better compensated. The buyer may not have to pay a dollar more. The difference is just how much of the purchase price actually lands in the founder's pocket.
Helping your seller understand their tax situation, and potentially connecting them with someone who can structure around it, isn't charity. As Joshua put it: it's a persuasive tool to move price in your favor without actually increasing it.
QSBS: The Exemption Most Agency Founders Are Leaving on the Table
If you're not familiar with Qualified Small Business Stock, this is worth understanding, because the upside is significant.
Section 1202 of the Internal Revenue Code allows founders who hold qualifying stock in a qualifying corporation for at least five years to exclude a substantial portion of their gain from federal income tax entirely. The structure: 100% exclusion after five years, stepping down from there.
The catch: you have to be a C-corporation. Not an LLC. Not an S-corp. A straight corporation.
Joshua was clear that converting from an LLC to a C-corp isn't a decision to make based on tax alone: corporations are, as he put it, like roach motels. Easy to get into, hard to get out. There are real operational differences, real costs, and real tradeoffs. But if you're building a business you intend to hold for several years before selling, and the numbers justify the structural complexity, the clock starts the day you make the switch.
That's important: you can convert today and start the holding period today. You don't get credit for years spent in a different entity. But five years from now, that decision could shelter a significant portion of a very large gain from federal tax entirely.
The One Thing Joshua Does Before He Bills Anything
The last part of our conversation was the one I want every founder to actually remember.
Joshua described a founder he'd been introduced to, someone considering an acqui-hire, who he spent a Sunday afternoon with, walking through the deal. He didn't charge for the call. At the end of it, he told the founder not to do the deal. Not because the deal was illegal, or because the structure was wrong, but because the founder wasn't going to get what they actually wanted from it.
That's a relatively unusual posture for an attorney. Most of the incentives in legal work point the other direction — toward engagement, toward billable hours, toward getting the deal done. Joshua's view is that the most valuable thing he can do for a client, sometimes, is tell them the deal isn't for them. Under the terms on the table. With the expectations they're carrying into it.
The founders who call Joshua when they're already in the deep end, when they've mentally committed, when the LOI is signed, when the mess is already made, are the ones who end up spending more, getting less, and wishing they'd had the conversation earlier. The founders who call him when they first start wondering are the ones who have options.
What to Do If You're Listening to This Right Now
Joshua's framework isn't complicated. It just requires doing the work before you need it.
Audit your entity structure. If you're an LLC taxed as an S-corp and you have any intention of selling in the next decade, understand what that structure means for a buyer and what it costs you in the transaction. If a restructure makes sense, do it now while you have time.
Understand how asset categories affect your tax. When you sell, purchase price allocation is a negotiation. Know which buckets benefit you and push toward them from the beginning.
If you're in California, get serious about your state tax situation. The Franchise Tax Board isn't forgiving. If you have the flexibility to move, personally and operationally, understand what that move is worth before you're three months from closing.
Look at QSBS eligibility. If you're structured as a C-corp, or considering converting, understand the holding period and what the exemption could mean for your outcome. The clock doesn't start until you file.
And don't fall in love with the deal. Stay honest with yourself about what you actually want from it.
The Bottom Line
The agency founders who come out well in transactions aren't the ones who got lucky with a buyer or happened to have a hot market. They're the ones who understood what they had, structured it well, and walked into the conversation with realistic expectations about what they'd actually net.
Joshua has sat on both sides of that table. He's seen founders walk away with far less than they expected because no one had the conversation early enough. He's also helped founders structure around tax exposure in ways that made deals work that otherwise wouldn't have.
The legal and tax side of a transaction isn't an afterthought. It's where a significant portion of the value you've built either gets preserved or quietly disappears.
