NIL and business8 min read

Do Athletes Need an LLC? The Honest Answer

An LLC cannot touch your team salary, but it can be the right tool for NIL, endorsements, camps, and business ventures. What it really does for taxes and liability, what it costs, and how to spot an LLC being sold to you as a scheme.

Someone will tell you that you need an LLC. Sometimes that is good advice. Sometimes it is the first step of a sales pitch. An LLC is just a legal container for a business. It can protect you and organize your money, but it does not make taxes disappear, and it does nothing at all for the biggest check most pros receive: team salary.

What an LLC cannot do

Your team salary cannot be run through an LLC. When you play for a team, you are the team's employee, you sign a standard player contract in your own name, and the team pays you on a W-2. You cannot have the team pay your company instead to lower your taxes. Anyone promising that is either confused or selling something.

What an LLC can do

Hold NIL and endorsement income. Sponsors can contract with and pay your LLC, which keeps that business separate from your personal finances.
Run camps, clinics, appearances, and merch. These are real businesses with real risk. If a kid gets hurt at your camp, you want the business, not your house, to be what is at stake.
Own business ventures and investments. A separate LLC for each venture keeps one failure from spreading to the others.
Make bookkeeping clean. A separate bank account and card for the business makes expenses easier to track and defend.

How an LLC is taxed

Single-member LLC (default): the IRS ignores it for income tax. The profit shows up on your personal return on Schedule C, and you pay self-employment tax (15.3% on the first $184,500 of combined wages and self-employment earnings in 2026, then 2.9% Medicare above that, plus an extra 0.9% for high earners).
LLC taxed as an S corporation: once profits are steady, the LLC can elect S corp status. You must pay yourself a reasonable salary through payroll, which gets payroll tax. Profit above that salary is not subject to Social Security and Medicare tax. The IRS watches for salaries that are unreasonably low.
Qualified business income (QBI) deduction: the 20% pass-through deduction, made permanent in 2025, generally does not help high earners in athletics, because the tax code lists athletics as a 'specified service' business. At lower incomes it may apply, so ask.

Worked exampleS corp savings on $300,000 of endorsement profit (2026, simplified)

Scenario A: college or NIL athlete with no other wages
Self-employment tax as a regular LLC	about $31,600
As an S corp with a $120,000 reasonable salary	about $18,400 payroll tax
Rough savings before extra costs	about $13,000
Extra S corp costs (payroll service, separate return, state fees)	often $2,000 to $6,000 a year
Scenario B: pro already earning $5 million in team salary
Self-employment tax as a regular LLC (Social Security already maxed)	about $10,500 (Medicare only)
As an S corp with a $120,000 salary	about $12,000 (employer Social Security share is not refunded)
Rough savings	none, often a loss after extra costs

Illustration only, before state and income taxes. The takeaway: the S corp election pays off most for someone whose endorsement income is their main income. For a pro whose team salary already covers the Social Security wage base, it may save nothing, so run the numbers with a CPA first.

What it costs to form and keep an LLC

Filing fees vary by state, usually from about $50 to a few hundred dollars.
Some states charge every year no matter what. California charges an $800 minimum annual franchise tax on every LLC, even one that makes nothing.
Texas LLCs with revenue below the state's no-tax-due threshold (millions of dollars) owe no franchise tax but still must file an annual information report.
If you form an LLC in one state and do business in another, you may have to register and pay in both. Forming in Delaware or Wyoming rarely helps an athlete who lives elsewhere.
Budget for a registered agent, bookkeeping, and a CPA to prepare the returns. With an S corp election, add payroll.

When an LLC makes sense

1
You have steady outside income
NIL, endorsements, appearances, camps, or content that brings in real money beyond a few small deals.
2
The activity carries risk
Events with kids, products people buy, or a storefront. Liability protection matters most here.
3
You are ready to keep it separate
Separate bank account, bookkeeping, and contracts in the business name.
4
Profits are high enough for an S corp to pay off
Ask your CPA to run the numbers once net profit is consistently above the cost of payroll and extra filings.

Red flags when someone sells you an LLC

They say it will lower tax on your team salary.
They want to be a co-owner or manager of your LLC.
They pitch a stack of LLCs, trusts, and offshore entities with big setup fees and no clear reason for each one.
They promise you can deduct your cars, clothes, and vacations 'through the company.' Personal expenses are not business expenses just because the company pays for them.
They discourage you from getting a second opinion from an independent CPA or lawyer.

Quick answers

Can a pro athlete run their salary through an LLC to save taxes?+

No. Team salary is paid to you as an employee on a W-2 under a player contract in your name. An LLC can hold endorsement, NIL, appearance, and business income, but not your team salary.

Should an NIL athlete form an LLC?+

It can make sense once you have steady NIL income or activities with liability risk like camps or merch. It keeps business money separate and can protect personal assets. It does not reduce taxes by itself unless you later elect S corp status and it pays off.

When does an S corp election make sense?+

When net profit is steady and high enough that the payroll tax saved on profit above a reasonable salary is more than the extra cost of payroll and filings. For pros whose team salary already maxes out Social Security, it may save nothing at all.

How much does an LLC cost per year?+

It depends on the state. Many states charge a small annual report fee. California charges an $800 minimum franchise tax every year. Add bookkeeping, tax prep, and a registered agent.

Sources

General education only, not tax, legal, or investment advice. Rules change and every situation is different. Confirm with a licensed CPA, attorney, and fee-only fiduciary.