The Dallas Morning News

Coaches benefit from utilizing LLCs

Corporate setup gives top earners tax relief, liability protection

- By BEN BABY Special Contributo­r

Ed Orgeron is known as the LSU coach who has the most recognizab­le voice in all of college football.

But on paydays, the hoarse-throated, barrelches­ted Cajun carries a different title: officer of “O” The Rozy Finch Boyz, LLC.

The name references Orgeron’s sons and the street they used to live on in California. LSU’s contract calls for the limited liability company to receive his salary instead of making direct personal payments to the coach, according to multiple reports.

“It enables me to put more money in retirement,” Orgeron said in May during SEC spring meetings.

What initially started as a way to split up sevenfigur­e salaries has turned into a practice that dates back at least 20 years and is used by several coaches, including Texas’ Tom Herman and former Texas A&M coach Kevin Sumlin.

The use of LLCs, common in many serviceori­ented profession­s, has its benefits, from tax relief to liability protection. However, those familiar with the business structure said it isn’t a secret potion that significan­tly boosts bank accounts for coaches.

“There aren’t any silver bullets with all this stuff,” said Atlantabas­ed agent Myles B. Solomon, who specialize­s in representi­ng college coaches and administra­tors. “There’s no magic to be done. But it’s

something that coaches appreciate, and I think that’s why coaches will do it.”

Roots of the practice

While it’s unclear exactly when LLCs started popping up in contracts, coaches such as former A&M coach Dennis Franchione and exGeorgia Tech coach Paul Johnson started using the practice in the ’90s.

Franchione’s “Fran, Inc.” was founded in 1996 during his time at New Mexico. According to his longtime accountant, John Perner, the shell company was formed out of a collaborat­ive effort with Franchione’s former agent, Craig Kelly, who represente­d Urban Meyer and TCU’s Gary Patterson, before he died in 2003.

Perner doesn’t remember exactly how it started, but one of the main reasons was to appease those who weren’t thrilled that the football coach was making more than prominent state officials.

“The original purpose was to split out the compensati­on to the university to show that the president was making more than the coach or the governor was making more than the coach,” said Perner, a certified public accountant who is a partner of an Albuquerqu­ebased firm.

But as the salaries for coaches skyrockete­d, that became unavoidabl­e. And one way to soften the realities of collegiate athletics was to split the total salaries into two, a base salary and a supplement­al salary. The base pay went directly to the coach, while the latter went to the shell company.

According to Franchione’s final contract obtained through an open records request, he officially received $500,000 in base salary while the remaining $1.5 million of his annual income was categorize­d as a corporate payment. The larger figure of the total salary was for noncoachin­g tasks such as appearance­s, interviews and relationsh­ips with media that reflect “positively on the football program.”

The structure was also indicative of the changing landscape for coaches. Part of earning checks included obligation­s to apparel companies and appearance­s on weekly TV and radio shows that generated revenue. While those TV and radio appearance­s weren’t necessaril­y new, the perks associated with making those appearance­s continued to rise.

“Once you’re successful, your persona is worth money and being in commercial­s is worth money,” said Solomon, a partner at Atlantabas­ed Element Sports Group. “It’s a lot of that stuff where you’re not just being paid to coach.”

Legal protection

Operating with an LLC or similar business can also shield a coach during potential litigation.

Rogge Dunn, a Dallasbase­d attorney, said he once set up a similar company for a coach to operate summer camps. If something disastrous happened, the corporatio­n was liable to get sued, not the coach himself.

While an individual could lose millions or other assets in a civil suit, a corporatio­n generally doesn’t have any assets to forfeit, even if a judge rules the camp or its affiliates were at fault.

“They just close down the corporatio­n and start a new one two weeks later under a different name,” Dunn said. “That’s a huge difference.”

LLCs tend to be operated by those familiar with tax law.

Herman’s LLC, 10 Culture, is headquarte­red in an office park in Houston (Herman also purchased his house through the same LLC, according to Travis County records).

The registered agent for Orgeron’s LLC is William Neilson, a New Orleansbas­ed attorney who specialize­s in taxation.

A few years ago, college coaches in Kansas were scrutinize­d for taking advantage of a provision that allowed LLC money to be exempt from state income tax. In 2016, KCURFM reported that Kansas men’s basketball coach Bill Self received 92% of his salary through a personal LLC. The state eventually closed the loophole in 2017.

While coaches are able to put some money away, taxes must still be paid on LLC revenue because of regulation­s about selfemploy­ment. But the shell company does provide some benefits, including different retirement plan options in addition to what the university provides.

Not all coaches are using LLCs for their school paychecks.

Chad O’Donnell, a basketball coachturne­dagent based in upstate New York, represents his former peers. He said the majority of his clients are at the Division II level or lower and none uses an LLC.

“At the level I’m dealing with, it’s mostly straightfo­rward,” O’Donnell said.

Just another option

And at least one of the richest coaches in the country isn’t using an LLC or a similar business for income.

A&M’s current coach, Jimbo Fisher, receives all $7.5 million directly, according to university CFO Jeff Toole. But like Franchione, Fisher’s base salary is officially set at $500,000, with the remainder deemed as supplement­al income. Like all of A&M’s athletic expenses, Toole said, Fisher’s salary is entirely paid by the athletic department.

While the use of the LLCs is legal and becoming a more common practice, some are hesitant to use them or even discuss them. Multiple people associated with LLCs declined to comment.

Solomon, who has handled coaches during his entire 16year career, said using the shell companies for salaries boils down to comfort level for schools and coaches alike. And even though the financial benefits are limited, it’s still worth it for coaches involved in one of the most lucrative and volatile fields in sports.

“The benefits are there, but it’s not crazy,” Solomon said. “It’s not millionair­es hiding money. It’s just taking advantage of opportunit­ies to put a little extra away.”

 ?? 2016 File Photo/Smiley N. Pool ?? LSU’s Ed Orgeron is among the college coaches who receive part of their compensati­on through limited liability companies. “It enables me to put more money in retirement,” Orgeron said in May during the SEC’s spring meetings.
2016 File Photo/Smiley N. Pool LSU’s Ed Orgeron is among the college coaches who receive part of their compensati­on through limited liability companies. “It enables me to put more money in retirement,” Orgeron said in May during the SEC’s spring meetings.

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