Key Takeaways:
- Revenue sharing adds complexity to NIL income, making it crucial to set up a dedicated business entity for tax savings and flexibility.
- Reviewing contracts carefully protects you from unfavorable payment terms, restrictive clauses, and multi-year commitments that limit your earning potential.
- Proactive tax planning and smart wealth-building moves let you manage multi-state obligations, support family, and grow long-term financial security.
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As a college athlete, you’re no longer just competing on the field — you’re also stepping into the business world. With name, image, and likeness (NIL) deals and school revenue sharing now on the table, the financial stakes are higher than ever. That means it’s critical to think beyond your next game and start protecting your income, your contracts, and your future.
Here are four essential areas you need to focus on right now:
1. Build Your Business Entity Early
If your school is paying you directly into your personal account, you’re leaving money on the table. Most athletes should receive NIL and revenue share payments through a business entity, usually a limited liability company (LLC) taxed as an S corporation (S corp).
Why this matters:
- Flexibility and liability protection: A business entity allows you to deduct legitimate expenses (like hiring family for real jobs, training, or marketing costs) in a tax-efficient way. With an LLC taxed as an S corp, you keep the legal benefits and management flexibility of an LLC (pass-through taxation, less formal structure) while getting the S corp’s tax advantages. This setup can reduce taxes compared with taking everything in your personal name and can eliminate LLC fees in certain states compared with forming an S corp right away.
- Tax savings: Without an entity, every dollar may be subject to self-employment and Social Security taxes. With an S corp, you can take part of your income as salary (subject to payroll tax) and the rest as a distribution (not subject to the same tax).
- Recordkeeping: Separate bank accounts and clear operating agreements make reporting clean and enable you to track the financial results of your NIL income.
The catch? You need to have this structure in place before your first payment hits and prior to receiving 1099s issued in your personal name. Once a school issues a 1099 form in your personal name, it’s much harder to correct.
2. Know the Contract Traps
Your revenue share and NIL agreements are contracts — and the fine print can change your career.
Look out for:
- Payment timelines: Many schools want to spread payments over 12 months. But if your deal isn’t renewed and you miss the transfer portal window, you could be stuck without options. Negotiating a shorter payment period can protect your flexibility.
- Penalty clauses: Some contracts cut your pay if you’re arrested, even if you’re never convicted. Others tie incentives to unrealistic performance goals, like shooting percentages, which can backfire on both you and your team. These are negotiable — don’t assume they’re set in stone.
- Multi-year commitments: Schools may lock you into deals that cap your earnings for two years or more, while they retain the right not to renew. In a fast-changing NIL market, that can cost you millions.
Treat contracts like game film — study them closely and get the right advisors involved before you sign.
3. Plan for Taxes Beyond the Basics
Revenue share and NIL money are taxable income. But how and where you earn it can make a big difference.
- State and local taxes (“jock tax”): You may be required to file non-resident state income tax returns for every state where you earn NIL income or perform activities, regardless of whether you are a resident or just visiting. Some states have no income tax (e.g., Texas, Florida, Tennessee), but many others do and enforce a “jock tax”. Understanding this before traveling or performing is key.
- Timing matters: Schools may accelerate or delay payments to stay under caps, but that affects your taxable year. Understanding when income hits your books helps you avoid surprise bills.
- Family payroll planning: Giving money directly to family isn’t deductible. But paying them a legitimate salary for real work in your business entity can be.
Work with a tax professional who knows the NIL landscape — and plan to do it before tax season, not after.
4. Think Like a Pro With Wealth-Building Moves
You may be making more money now than many professionals earn in their 30s. That means you’re eligible for financial tools most college students don’t even know exist.
- Smart budgeting: Cars, jewelry, and flashy spending drain fast. Investing in your future — through retirement accounts, annuities, or carefully chosen opportunities — creates lasting security.
- Deferred compensation: Like the famous Allen Iverson trust, you can structure certain earnings to pay out years later — protecting you from overspending today and guaranteeing future income.
- Accredited investor opportunities: If you earn $200,000 individually or $300,000 as a household, or have $1 million in net worth, you qualify as an accredited investor. That opens the door to exclusive investments and long-term wealth strategies.
Remember: You’re not just playing for today’s paycheck. You’re building a financial foundation that can last well beyond your playing years.
How MGO Can Help
Our Entertainment, Sports, and Media team guides athletes like you through the unique challenges of NIL, revenue sharing, and brand-building income. We can help you set up a business entity, negotiate contracts, and design tax strategies that protect wealth today while securing tomorrow.
Reach out to our team today to build your game plan for NIL and revenue sharing success.
