Coaches benefit from utilizing LLCs
Corporate setup gives top earners tax relief, liability protection
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.”
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.”
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.