The College Sports LLC: Why Universities Are Building Business Entities

The Two-Tier LLC System: Universities and Athletes Both Playing the Game

What makes this revolution fascinating is that it’s happening at two levels simultaneously.

University-Level LLCs: The Institutional Play

Clemson Ventures encompasses multimedia rights, media production, sales, marketing, NIL operations, and business operations. The school reported more than doubling its gross and net revenue compared to its previous third-party multimedia rights deal. That’s the kind of performance that gets other athletic directors paying attention.

These entities are going after revenue streams beyond traditional fundraising and media rights: mixed-use real estate around stadiums, premium fan engagement experiences, public-private partnerships, even entertainment districts. The Big Ten is exploring Big Ten Enterprises to house league-wide assets. The Big 12 took an equity stake in the Players Era Festival. Conferences are thinking like tech startups—build IP, scale distribution, maximize valuation.

Athlete-Level LLCs: The Individual Hustle

Meanwhile, individual athletes are forming their own LLCs to manage NIL earnings. And they should. When you’re a college quarterback pulling in $400,000-$600,000 annually, or an elite prospect like Arch Manning with a $7.1 million NIL valuation, you’re not a student-athlete. You’re a brand. And brands need corporate structure.

Charlotte North, a lacrosse player, formed two LLCs before even running her first clinic. That’s smart business. An LLC offers:

• Personal liability protection: If your NIL business gets sued, your personal assets—car, savings, future earnings—are protected.
• Tax advantages: Pass-through taxation, business expense deductions (travel, equipment, content creation tools, professional services), and potential for S-corp election to reduce self-employment taxes.
• Professionalism with sponsors: Brands prefer working with registered business entities. It simplifies payment processes and signals you’re serious about your business.
• Simplified income management: When you’re juggling endorsements, social media revenue, autograph signings, and merchandise sales, funneling everything through one entity makes accounting and reporting dramatically easier.
• Long-term strategy: The LLC becomes the foundation for post-college ventures. You’re not just building a business for four years; you’re building a platform.

Athletes are also trademarking their names, logos, and slogans, creating defensible intellectual property. This isn’t kids playing dress-up in the business world. This is real entrepreneurship.

The Tax Implications No One Wants to Talk About

Let’s get into the weeds for a moment, because this is where things could get messy. The IRS has explicitly stated that NIL payments serve a private rather than public interest and are taxable to student-athletes. That’s straightforward. But what about universities?

Historically, college sports revenue enjoyed tax-exempt status under the rationale that it served educational purposes. But lawmakers are increasingly scrutinizing this exemption. When athletic departments generate billions while paying athletes like employees, the “substantially related to education” argument starts to crumble.

Enter the LLC structure. If a university creates a taxable LLC to handle commercial operations, the LLC itself pays corporate taxes on profits—but the university’s broader tax-exempt status remains protected. The trick is managing the flow of money between entities. If too much profit flows back to the university without proper justification, the IRS could challenge the arrangement.

And then there’s the question of collectives. NIL collectives, which pool donations to facilitate NIL opportunities, have faced significant IRS scrutiny. The IRS Chief Counsel concluded that many collectives don’t qualify for 501(c)(3) tax-exempt status because they primarily benefit private interests (the athletes) rather than charitable causes. That means donations aren’t tax-deductible, and collective income is taxable.

The solution? Some collectives are pivoting to ensure their activities primarily further charitable purposes—like partnering with actual charities and making the athlete compensation a secondary benefit rather than the primary one. It’s creative structuring at its finest.