Should Your Student-Athlete Form an LLC?
By Pat Brown, MBA
www.parentsofstudentathletes.com
With the rise of Name, Image, and Likeness (NIL) opportunities, student-athletes are now earning income through endorsements, sponsorships, and personal brands. This raises an important question for parents: Should your son or daughter form a Limited Liability Company (LLC)? Let’s explore the pros and cons of forming an LLC as a student-athlete and why consulting with an attorney who specializes in LLCs is essential.
What is an LLC?
A Limited Liability Company (LLC) is a legal business structure that offers liability protection and potential tax advantages. It separates personal assets from business activities, providing a layer of protection against lawsuits and debts.
Pros of Forming an LLC for a Student-Athlete
Liability Protection – An LLC can protect your child’s personal assets from lawsuits related to business activities, contracts, or endorsement deals.
Tax Advantages – Depending on income, an LLC may provide tax benefits, such as deducting business expenses (training, travel, marketing, etc.).
Professionalism – Having an LLC adds credibility when negotiating sponsorships and brand deals.
Brand Protection – An LLC can help protect the athlete’s brand name and intellectual property.
Control Over Income – Funds can be managed through a business bank account, keeping personal and business finances separate.
Flexible Management – Unlike corporations, LLCs have fewer formalities and offer more control over business decisions.
Easier Contract Negotiations – Many companies prefer dealing with an LLC rather than an individual.
Estate Planning – An LLC allows families to plan for long-term financial management.
Cons of Forming an LLC for a Student-Athlete
Setup and Maintenance Costs – Forming and maintaining an LLC involves filing fees, potential legal costs, and annual state fees.
Complex Taxation – Depending on the state and revenue, an LLC may require more complex tax filings.
Compliance Requirements – Student-athletes must stay compliant with NIL rules, NCAA guidelines, and state laws.
Banking and Accounting – Keeping separate business accounts and tracking expenses requires additional financial management.
Legal Considerations – Certain sponsorships and agreements may require additional legal oversight.
Limited Liability Isn’t Absolute – If an athlete personally guarantees a contract or loan, they may still be held liable.
Potential NCAA and School Compliance Issues – Some schools have NIL policies that require prior approval for business entities.
Time Commitment – Managing an LLC requires time and effort, which can be challenging for student-athletes balancing academics and sports.
Why You Should Consult an Attorney
Given the legal complexities, it is crucial to hire an attorney who specializes in LLC formations and NIL-related issues. An attorney can help ensure:
The LLC is properly structured.
Compliance with NIL rules and tax laws.
Contract negotiations are legally sound.
Personal assets are fully protected.
Final Thoughts
While forming an LLC can provide numerous benefits for a student-athlete, it is not a one-size-fits-all solution. Parents should weigh the pros and cons, understand their child’s financial and career goals, and seek professional legal guidance before making a decision. Consulting an attorney experienced in LLCs and NIL contracts can make the process smoother and ensure the best outcome for your student-athlete’s future.
If you’re considering an LLC for your son or daughter, take the next step by speaking with a qualified legal professional today!
