Good morning, and thanks for spending part of your day with Extra Points.
At this point, almost every P5 program has at least one NIL collective raising money for their athletes. Several schools have more than one collective. Shoot, by the time you finish reading this newsletter, somebody, somewhere, will have probably started another collective.
I've written about how these entities can vary significantly in sophistication. Some groups, after all, are essentially just message board dads passing the proverbial hats. Others are full-fledged, professionalized sports marketing agencies.
But as of right now, most of them are registered as LLCs. While a handful of collectives are explicitly trying to operate as for-profit businesses, the majority are functioning as Not For Profits. A fan (or business) contributes money, the collective takes a small percentage off the top to pay for overhead (typically something between 10-20% right now), and the athletes get the rest. No shareholders, no dividend checks, no actual profits.
But a handful have incorporated themselves differently. A handful of these collectives have been incorporated as non-profits, often claiming status as a 501(c)(3) These entities are exempt from federal income taxes, and donations to these groups, unlike those to LLCs, are tax-deductible.