By Kurt Maurillo, CFP®, SE-AWMA℠, NFLPA®
Managing Director – Wealth Advisor, Clarity Wealth

You have signed your first NIL deal, whether it is a local brand partnership, a social media sponsorship, or something larger. With income now coming in, you are asking the right question: How should I set up a business entity for my NIL income? This is one of the most common questions I receive from college athletes and their families and the answer is straightforward once you understand the basics and can help athletes and their families avoid costly pitfalls.

Here is what you need to know.

First, Why Does Your Entity Structure Matter?

Every dollar you earn from NIL deals comes with tax and legal responsibility attached. The IRS (Internal Revenue Service) treats you as a self-employed business owner. That means you are responsible for tracking income, paying taxes, and managing how that money is reported.

The structure you choose determines three things:

• How much self-employment tax you pay
• Whether your personal assets are protected if something goes wrong
• How you look to future sponsors, agents, and financial partners

Setting this up correctly from the start is about being intentional, not about adding complexity.

Option 1: Sole Proprietor

A sole proprietor is the simplest structure. If you earn NIL income and do nothing to formally set up a business, this is already how the IRS sees you by default.

How it works: You report your NIL income on Schedule C when you file your taxes. All net earnings are subject to self-employment (SE) tax.

What is self-employment tax? It is the combined total of Social Security and Medicare taxes. As a traditional employee, your employer pays half of this for you. As a self-employed person, you pay both sides. The IRS self-employment tax rate for 2025 is 15.3% on net earnings up to $176,100 (Source: IRS.gov). That 15.3% breaks down to 12.4% for Social Security and 2.9% for Medicare.

When sole proprietor makes sense:

• You are earning under $50,000 annually in NIL income
• You are just getting started and want to keep things simple
• You want minimal administrative costs and paperwork

The real limitation is lack of personal liability protection. If a brand deal goes sideways, a contract dispute arises, or a lawsuit lands, your personal finances are exposed. There is nothing separating you from the business.

Option 2: Limited Liability Company (LLC)

An LLC is a legal structure that formally separates your personal assets from your business activities, helping protect your personal finances from business-related risks. First, you form an LLC through your state (typically a one-time filing fee, plus annual renewal fees depending on your state). Once that is complete, your LLC becomes the entity that signs contracts, receives income, and holds business assets. The core benefit is liability protection. If a deal results in a legal dispute, your personal bank accounts, car, and other assets are behind that wall.

A key point to note is that a single-member LLC is taxed the same as a sole proprietor by default. Forming an LLC does not automatically change your tax treatment. You still file Schedule C and pay 15.3% self-employment tax on net earnings. The legal separation provides liability protection but does not reduce your tax bill on its own.

When an LLC makes sense:

• You are signing formal endorsement or sponsorship contracts
• You want liability protection before deals get bigger
• You are building a personal brand and want a professional structure in place

The Next Level: LLC with S-Corp Election

This is where tax strategy becomes important, and where working with an experienced advisor is most valuable. If your NIL income is growing, you can elect to have your LLC taxed as an S-Corporation (S-Corp). This is not a new entity and you keep your LLC. You file a form with the IRS (Form 2553) to change how it is taxed.

Why does this matter? With an S-Corp election, you split your income into two buckets.

• Bucket 1: A reasonable salary you pay yourself (subject to SE tax)
• Bucket 2: Profit distributions from the business (not subject to SE tax)

At 15.3% SE tax, this can mean real money saved for athletes with meaningful NIL income.

For example, an athlete earning $80,000 in NIL income as a sole proprietor pays self-employment tax on the entire amount. With an S-Corp structure, the athlete might pay themselves a $40,000 salary and take $40,000 as a distribution, significantly reducing the income subject to self-employment tax. Actual savings depend on your situation, reasonable compensation requirements, and state regulations, so it is important to consult a qualified advisor.

Important note: The S-Corp structure also adds administrative responsibility, including payroll, a separate tax return, and annual compliance. For most athletes earning under $50,000 in NIL income, the cost of compliance often outweighs the tax savings. Above that threshold, the math typically starts to shift. (Source: CLA Connect, December 2025)

What About Deductions? Can I Write Things Off?

Yes, and this applies whether you are a sole proprietor or an LLC. Business expenses tied to your NIL activity are deductible. That includes:

• Agent fees and professional service fees
• Travel to appearances or events
• Training equipment used for brand content
• Marketing and content creation costs

Deductions lower your net profit, which in turn reduces the income subject to self-employment tax. Track all expenses, keep receipts, and use a separate business bank account from the beginning, regardless of your entity structure.

A Quick Side-by-Side Comparison

	Sole Proprietor	LLC	LLC with S-Corp
Setup cost	None	State filing fee	State filing fee + CPA
Liability protection	No	Yes	Yes
Default tax treatment	SE tax on all net earnings	Same as sole proprietor	Salary + distributions
Tax savings potential	None	None (by default)	Yes, above ~$50K income
Administrative burden	Low	Low-moderate	Moderate-high
Best for	Just starting out	Active deals, growing brand	$50K+ NIL income

One More Thing: Your Entity Structure Does Not Live in Isolation

This is the piece most athletes and families miss entirely. Your LLC, your taxes, your contracts, and your investment plan are not separate conversations. They are one conversation. At Clarity Wealth, Kurt works alongside your agent and CPA as your Head Coach coordinating the full team so everyone is running the same play. That includes setting up the right entity structure at the right time, not just when it is convenient.

The NIL economy hit an estimated $1.9 billion in 2025, nearly double the prior year, driven in large part by the House v. NCAA revenue-sharing settlement. (Source: Rally Fuel, January 2026) The athletes who will build lasting wealth from this moment are the ones who treat their brand like a business from the start.

Frequently Asked Questions

Do I need an LLC for NIL income?

Not necessarily. If you are earning modest NIL income and just getting started, operating as a sole proprietor and filing Schedule C is a legitimate and simpler path. As your income grows or as your contracts become more formal, an LLC provides liability protection that makes the setup cost worthwhile.

When should I form an LLC for my NIL deals?

Before you sign significant contracts or endorsement agreements is the right time to have this conversation. Having a formal entity reviewed by an attorney and financial advisor before you sign is good practice, regardless of dollar amount.

Does forming an LLC reduce my taxes?

Not automatically. A single-member LLC is taxed the same as a sole proprietor by default. Tax savings come through an S-Corp election, which makes the most sense when NIL income is consistently above $50,000 annually.

What is self-employment tax and why do I owe it?

SE tax covers Social Security and Medicare. Traditional employees split this cost with their employer. As a self-employed person, you pay both sides. The 2025 rate is 15.3% on net earnings up to $176,100. (Source: IRS.gov)

Can I deduct expenses against my NIL income?

Yes. Legitimate business expenses tied to your NIL activity, such as agent fees, travel, and marketing costs, reduce your net profit and your SE tax exposure. Keep receipts and use a dedicated business account.

External Resources

• IRS Self-Employment Tax Overview – Official IRS guidance on SE tax rates, calculations, and filing requirements for sole proprietors and LLC members.
• IRS Form 2553 – S Corporation Election – The official form used to elect S-Corp tax treatment for an LLC.

Ready to Build Your Wealth Game Plan?

You put in the work to get here. The money you earn from NIL is real, and the decisions you make now will follow you long after the season ends.

Kurt Maurillo, CFP®, SE-AWMA℠, NFLPA® works directly with college and professional athletes to build the financial infrastructure that supports a career, a brand, and a future. If you are ready to talk through your entity structure and what it means for your wealth plan, reach out directly.

Kurt Maurillo, CFP®, SE-AWMA℠
Managing Director – Wealth Advisor, Clarity Wealth
239.479.7931 | kurt.maurillo@clarity-wealth.com

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