Should I Create an LLC for My NIL Income?
As NIL income grows, more student-athletes and families are asking a new question:
Should I create an LLC for my NIL income?
The short answer is: it depends.
An LLC can be useful in certain situations, but it is not a magic tax strategy. For some athletes, it may help create structure, separate business activity and prepare for bigger opportunities. For others, the cost and complexity may outweigh the benefit.
Families should understand what an LLC actually does before creating one.
When an LLC May Not Help
An LLC may not make sense for every athlete.
If NIL income is low or moderate, the cost of forming and maintaining an LLC may be more trouble than it is worth. Depending on the state and the athlete’s situation, there may be filing fees, accounting costs, extra paperwork and ongoing maintenance.
An LLC also does not automatically reduce taxes.
If the LLC is taxed as a sole proprietorship, the athlete may not receive a tax advantage compared with operating individually.
Families should also be careful with S corporation conversations. There is no one-size-fits-all income number where an S corp election suddenly makes sense. Each athlete’s situation is different.
International athletes may face additional limits. Nonresident aliens generally cannot be shareholders in an S corporation, which means that structure may not be available depending on residency status.
What an LLC Actually Does
An LLC creates a separate legal entity.
That can help separate business activity from personal activity. For an athlete doing camps, appearances, brand partnerships or other commercial work, that structure may be useful.
An LLC may also help with:
- Legal protection: It can help shield personal assets from certain business liabilities.
- Business structure: It can make banking, contracts and branding more organized.
- Tax flexibility: An LLC can choose how it is taxed, depending on the situation.
The key word is structure.
An LLC can help an athlete look and operate more like a business. But families should not assume that creating one automatically saves money.
The S Corp Question
In some higher-income situations, an LLC that elects S corporation status may reduce self-employment taxes.
The basic idea is that the athlete pays themselves a reasonable salary, which is subject to payroll taxes, and may take remaining profits as distributions, which are not subject to self-employment tax.
That can create savings in certain cases.
But it also adds complexity.
There may be payroll requirements, accounting support, additional filings and a greater need for professional tax guidance. For many athletes, especially those early in their NIL journey, that added complexity may not be worth it yet.
Why Some Athletes Use an LLC
For athletes with meaningful NIL income, business activity or long-term earning potential, an LLC may help create a more professional foundation.
It can help organize income and expenses.
It can make contracts and payments cleaner.
It can support brand growth if the athlete expects to work with sponsors, run camps, sell products or manage multi-state opportunities.
It can also help families think more seriously about recordkeeping, business expenses and long-term planning.
Questions Families Should Ask First
Before forming an LLC, families should slow down and ask:
How much NIL income is the athlete actually earning?
Is the income consistent or one-time?
Are there real business risks tied to appearances, camps or partnerships?
Does the athlete need separate banking and bookkeeping?
Is the athlete a U.S. resident for tax purposes?
Would an S corp election even be available?
Do the tax savings justify the added cost?
The answer will not be the same for every athlete.
The Family Takeaway
An LLC can be a helpful tool.
It can provide structure, legal separation and flexibility for athletes who are building real business activity around NIL.
But it is not automatically the right move.
Families should consult a qualified tax advisor who understands NIL income and athlete-specific issues before forming an LLC or making an S corporation election.
The goal is not just to create a company.
The goal is to make sure the athlete is protected, organized and prepared for the opportunity in front of them.
This section is educational and should not be read as financial, legal or tax advice. Families should consult qualified professionals for advice specific to their situation.
For questions, contact Ed Castellanos at The Seiler Group of Raymond James at ed.castellanos@raymondjames.com.