Should NIL Income Be Paid to the Athlete or a Business? (LLC vs Personal Income)
- MJ Cunningham, EA
- Apr 23
- 3 min read
Updated: Apr 27
Most NIL athletes are getting paid the wrong way. Before your next deal is signed, here is exactly how to structure your income so you keep more of what you earn. One of the most common questions college athletes ask is whether NIL income should be paid directly to them or to a business like an LLC.
The answer depends on income level, liability, tax strategy, and long term goals. Some athletes should receive NIL income personally, while others benefit from using a business entity.
This guide explains when NIL income should be paid personally and when a business structure may make sense.
1. Can NIL Income Be Paid Directly to the Athlete?
Yes. NIL income can be paid directly to the athlete.
Many athletes start this way, especially when NIL income is:
Small
Infrequent
Just getting started
One or two brand deals
Testing NIL opportunities
When paid personally, the income is still taxable and reported on the athlete’s tax return.
This is the simplest structure.
2. When NIL Income Is Paid Personally
If NIL income is paid directly to the athlete:
Income is reported on Schedule C
Athlete pays self employment tax
No entity is required
No separate business return
Simpler setup
This works well for lower income NIL athletes.
3. Can NIL Income Be Paid to an LLC?
Yes. NIL income can be paid to an LLC.
Many athletes create an LLC to:
Separate business and personal income
Create professional branding
Add liability protection
Plan for higher income
Prepare for S Corp election later
The LLC does not automatically reduce taxes, but it can open planning opportunities.
4. When NIL Income Should Consider an LLC
An LLC may make sense when:
Income exceeds $15,000 to $25,000
Multiple NIL deals
Brand partnerships increasing
Agent involvement
Merchandise or content creation
Travel for appearances
Liability concerns
Long term NIL brand building
At this stage, many athletes transition to a business structure.
5. Does Paying NIL Income to an LLC Reduce Taxes?
Not automatically.
A single member LLC is usually taxed the same as personal income. The income still flows to the athlete’s personal tax return.
However, an LLC allows:
Cleaner accounting
Business bank account
Professional structure
Future S Corp election
Better expense tracking
Tax savings usually come later with planning.
6. What About S Corporation for NIL Athletes?
Some higher income NIL athletes elect S Corp status.
This may reduce self employment tax when:
Income is higher
Expenses are significant
Business structure is established
This is typically considered when NIL income reaches:
$50,000 or more
This varies by situation.
7. Example: NIL Income Paid Personally
Athlete earns: $20,000 NIL income
Paid personally:
Reported on Schedule C
Pays self employment tax
Simple structure
This is common for newer athletes.
8. Example: NIL Income Paid to LLC
Athlete earns: $75,000 NIL income
Paid to LLC:
Business bank account
Track expenses
Potential S Corp election later
Better tax planning
This structure may make more sense.
9. Does an LLC Protect NIL Athletes?
An LLC may provide liability protection depending on:
Contracts
Brand deals
Appearances
Content creation
Business activities
This is one reason athletes form LLCs.
10. Should Parents Create the LLC Instead?
This depends on:
Athlete age
State rules
Income level
Contract structure
Sometimes the athlete owns the LLC. Sometimes parents assist with setup.
This should be structured carefully.
11. Common NIL Structure Mistakes
Creating LLC too early without planning
Not creating LLC when income grows
Mixing personal and business funds
Not opening business bank account
Receiving payments to wrong entity
Not planning for S Corp election
Ignoring state rules
Avoiding these mistakes helps.
12. When NIL Structure Becomes More Important
Structure becomes more important when athletes:
Earn over $25,000
Have multiple deals
Have agents
Sign long term contracts
Sell merchandise
Create content revenue
Build personal brand
At this point, planning matters.
13. Should NIL Income Go to Athlete or Business?
General guideline:
Under $15,000 to $20,000
Personal income usually fine
$20,000 to $50,000
Consider LLC
Over $50,000
LLC and tax planning often beneficial
This varies by situation.
14. NIL Structure Planning Matters
Choosing the right structure helps:
Reduce taxes
Stay compliant
Separate finances
Plan for growth
Avoid mistakes
Protect income
Planning early makes a big difference.
Need Help Structuring NIL Income?
If you are earning NIL income and are unsure whether it should be paid to you personally or to a business, it is better to plan early.
Aureus Advisory helps NIL athletes:
Choose business structure
Plan tax strategy
Set up LLCs
Evaluate S Corp elections
Structure NIL income properly
Schedule a NIL consultation to determine the best structure for your NIL income.
