Should Every NIL Athlete Set Up an LLC?

You just landed your first NIL deal. The brand sent a contract, a check is on the way, and someone in the comments told you to go get an LLC. Now you are wondering if that is actually the right move.

Here is the honest answer: it depends. But before you spend a dollar on legal fees, there are three things every NIL athlete needs to understand.

The Moment You Signed, You Became a Business

The IRS does not see you as a student who made some extra money. They see a self-employed individual. That means your NIL income is subject to income tax AND self-employment tax, which runs around 15.3% on top of your regular rate. That tax bill exists whether you have an LLC or not.

Most athletes are blindsided by this the first tax season. Do not be one of them.

What an LLC Actually Does (and Does Not Do)

An LLC is worth having for two reasons:

Asset protection. It creates a legal wall between your personal finances and your business activity. If a brand deal goes sideways and ends in a dispute, your personal accounts and future earnings have a layer of separation.

The S-Corp opportunity. Once your NIL income consistently clears $40,000 to $50,000 per year, you can elect S-Corp status through your LLC. This move can save you thousands of dollars in self-employment taxes annually. It is one of the most overlooked strategies for athlete earners and one of the first conversations we have with every new client.

What an LLC does NOT do is automatically lower your taxes. Setting one up without a strategy behind it changes very little on your return.

The Real Question Is What Stage You Are At

If you are pulling in under $20,000 this year and just getting started, you may not need an LLC yet. A dedicated business bank account, clean records, and a solid tax plan can be enough for now. Keep it simple. If you are over $40,000, growing fast, or have deals across multiple states, an LLC with an S-Corp election is very likely worth the setup cost. The savings will outpace the annual fees many times over.

What to Do Right Now

1. Open a separate bank account for your NIL income today. Never mix it with your personal money.
2. Set aside 25 to 30 percent of every payment before you spend anything. This is your tax reserve.
3. Talk to a CPA who specializes in athletes before your next filing, especially if you have multiple deals or are earning in more than one state.

The LLC question is a smart one to ask. But the bigger question is whether you have a plan for the money you are already earning. That is where most athletes leave the most on the table. Athlete's Tax works exclusively with college and professional athletes to help them keep more of what they earn. Schedule a free consultation at athletestax.com.

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