When preparing to sell, understanding taxes on selling a branding agency is essential for planning a successful exit. Taxes affect your net proceeds and should never be an afterthought.

At Merge, we help founders think holistically about their sale—including taxes—so they can plan ahead, minimize surprises, and maximize what they keep. Here’s what every founder should know about taxes on selling a branding agency.

Why Tax Planning Matters

Taxes on selling a branding agency can take a significant bite out of your proceeds. Without proper planning, you could pay more than necessary or face unexpected liabilities.

Effective tax planning allows you to:

  • Understand what portion of your sale will be taxed as capital gains
  • Identify potential ordinary income components
  • Plan for state and local taxes
  • Structure your deal to achieve the best possible tax outcome

Starting tax planning early in the process gives you more flexibility to optimize your deal structure and avoid surprises at closing.

Asset Sale vs. Stock Sale

One of the biggest factors influencing taxes on selling a branding agency is whether the transaction is structured as an asset sale or a stock sale.

Asset Sale

In an asset sale, you sell the agency’s assets—such as contracts, equipment, goodwill, and intellectual property—rather than shares of the company itself. Buyers often prefer asset sales because they can “step up” asset values for depreciation.

For sellers, this structure can trigger different tax rates for different asset categories. For example:

  • Goodwill and intangible assets may qualify for favorable long-term capital gains treatment
  • Certain equipment or depreciated assets may be taxed as ordinary income (due to depreciation recapture)

Stock Sale

In a stock sale, you sell your ownership interest in the company itself. For sellers, this is often simpler and more tax-efficient, with most proceeds taxed as long-term capital gains.

At Merge, we help founders understand these differences so they can negotiate deal structures that optimize their net proceeds after taxes.

Capital Gains vs. Ordinary Income

Taxes on selling a branding agency depend on the character of the income. Long-term capital gains (assets held for more than one year) are taxed at lower rates than ordinary income.

Properly allocating purchase price to assets like goodwill can maximize capital gains treatment. In contrast, earn-outs, consulting agreements, or compensation for services may be taxed as ordinary income at higher rates.

Merge works with founders and their tax advisors to ensure allocations are clear and favorable.

State and Local Tax Considerations

Where your agency is located—and where you reside as a seller—affects your total tax liability. Some states have high capital gains rates, while others, like Florida and Texas, have no state income tax.

Sellers should review their state and local tax exposure early. In some cases, residency planning before a sale can reduce overall tax burdens.

Installment Sales and Timing

If part of your sale proceeds are paid over time (for example, in an earn-out or seller financing arrangement), installment sale rules may apply. Under IRS rules, you pay tax as payments are received, which can help spread tax liability over several years.

Proper planning ensures you understand how installment payments affect your cash flow and tax obligations.

Entity Structure Impact

Your business’s legal structure—LLC, S Corporation, or C Corporation—also influences taxes on selling a branding agency.

  • LLCs and S Corporations: Generally allow pass-through taxation, with most gains taxed at capital gains rates.
  • C Corporations: May result in double taxation (once at the corporate level, again when proceeds are distributed to shareholders), unless structured carefully.

Founders should work closely with advisors to understand how their entity structure impacts tax treatment and potential strategies to reduce tax liability.

Preparing for Tax Withholding and Payments

Buyers may withhold a portion of the purchase price for escrow or to meet tax obligations (e.g., sales tax on assets). It’s important to anticipate these adjustments so you’re not surprised at closing.

At Merge, we guide founders through these details so they understand what to expect and can plan cash flow accordingly.

How Merge Helps

Merge takes a holistic approach to M&A advisory, helping founders think beyond just the headline purchase price. We help founders work with their tax and legal advisors to structure deals thoughtfully, anticipate tax implications, and keep more of what they’ve earned.

Our founder-first philosophy means we care about your net proceeds—not just the gross sale price.

Final Thoughts

Taxes on selling a branding agency can have a significant impact on your final outcome. Proactive planning is essential to minimize taxes, reduce surprises, and maximize what you take home.

At Merge, we help founders prepare for every aspect of their sale—including tax planning—so they can exit confidently and keep more of what they’ve built.

If you’re starting to think about selling your branding agency, we’d love to help you prepare strategically, structure your deal thoughtfully, and plan ahead for taxes on selling a branding agency.