Cash vs. Equity: Smart Deal Structuring for Athletes

Athletes today are presented with more than just cash offers. They’re being invited into ownership conversations. With NIL opportunities booming and early-stage investment deals on the table, athletes and their advisory teams face a pivotal choice: take the money upfront or take a seat at the table through equity. This decision isn’t just financial, it’s strategic. The way a deal is structured can define an athlete’s wealth trajectory long after the playing days are over. Timing, tax treatment, and personal financial goals all play a role.

Cash is straightforward, it’s immediate, predictable, and liquid. For many athletes, especially early in their careers, financial stability is crucial for building a solid foundation. It can be used for paying off debt, investing, supporting family, or launching a side venture. It’s also easier to account for: there’s no waiting for a liquidity event or worrying about valuation. However, cash is taxed heavily, often as ordinary income plus self-employment tax, which can consume nearly half of the earnings. And once spent, it’s gone.

Equity, on the other hand, holds promise for long-term wealth. If the business grows, the value of that equity can multiply, especially if structured properly within a C-Corp under the Qualified Small Business Stock (QSBS) rules. This could mean paying zero federal tax on the first $15 million in capital gains. Equity may also provide an ongoing income stream through dividends or profit sharing. But equity is inherently risky. Many early-stage companies fail, and even if they succeed, it can take years to see a return on investment. Illiquidity and lack of control are real concerns.

The most strategic deals often involve a combination of cash and equity. A base cash amount offers immediate security while the equity portion captures future upside. Athletes who believe in the brands they partner with or who bring significant marketing power may negotiate for equity with limited IP use, keeping the door open for tax-favorable treatment. Setting up a trust or separate entity to hold equity or IP rights may further enhance tax planning and asset protection.

Cash brings liquidity, simplicity, and certainty, but it’s fully taxed and offers no future growth. Equity can create long-term wealth and passive income, but it’s risky, complex, and often illiquid. For athletes in early earning years, a cash-heavy approach may offer necessary stability. But for those with financial cushion or proven brand value, equity can be the key to building generational wealth.

Ultimately, this isn’t about choosing between a check and shares. It’s about choosing between momentary applause and lasting ownership. The best athletes and advisors look beyond the headlines to understand how wealth is created, preserved, and passed on. Whether it’s cash, equity, or both, structure matters. Cash is king. But equity? That’s how kingdoms are built.