Professional Athletes Archives - MGO CPA | Tax, Audit, and Consulting Services

Charting Your Financial Path Beyond the Game

Key Takeaways:

Many professional athletes go on to achieve even greater financial success in their lives after sports through pro-active financial planning and capitalizing on post-career opportunities.
Having the right financial advisory team is crucial for transitioning athletes to make smart money decisions across areas like investments, business ventures, taxes, estate planning, and risk management.
With proper guidance, athletes can turn their playing careers into lifelong financial stability and growth through entrepreneurship, investments, and other lucrative second careers.

As a professional athlete, you’ve spent years honing your skills, building your career, and making a name for yourself. But what happens when the final whistle blows and your playing days are behind you?

The good news is many athletes move on to highly successful and lucrative ventures after their time in sports — some even making more money than they did during their athletic careers. With the right financial support and strategic planning, you can be one of them.

From Athlete to Entrepreneur: Maximizing Post-Career Opportunities

The transition to life after sports can be incredibly rewarding, opening doors to new and exciting opportunities. Many professional athletes have not only avoided the financial pitfalls often associated with post-career life but have also thrived financially.

Here are a few notable examples of athletes who’ve achieved significant financial success with their second careers:

Kenny Smith

Kenny “The Jet” Smith played 10 years in the National Basketball Association (NBA), winning back-to-back championships with the Houston Rockets in 1994 and 1995. While Smith made just under $12 million over his playing years, as an analyst on the Inside the NBA alongside Ernie Johnson, Charles Barkley, and Shaquille O’Neal, Smith reportedly takes home $16 million per year.

Maria Sharapova

While Sharapova earned over $300 million during a career where she became just the tenth woman to win all four major championships, she retired at the young age of 32 in 2020. Since that time, she has established herself as an investor and entrepreneur — working with health and wellness brands like Therabody and Tonal — while also serving on the board of directors for luxury fashion house Moncler Group.

Derek Jeter

Jeter played 20 seasons at shortstop for the New York Yankees, winning 5 World Series titles before retiring in 2014. After earning over $265 million in MLB salary, Jeter went on to found Jeter Publishing with Simon & Schuster and the media company The Players’ Tribune in 2014, which publishes first-person stories from athletes. From 2017, he became part-owner and CEO of the Miami Marlins.

David Beckham

Playing 21 seasons of professional soccer for teams like Manchester United, Real Madrid, the LA Galaxy, Beckham racked up league titles and millions in contract dollars. Retiring in 2013, he transitioned into a successful business career — starting the management company DB Ventures and collaborating with brands like HUGO BOSS. In 2018, Beckham brought Major League Soccer to Miami as co-owner of Inter Miami CF.

These examples demonstrate the wealth creation potential that exists long after an athletic career ends. Of course, it’s not just about what you do after your playing days are over; it’s also about what you do with your money.

The Role of Financial Advisors in Your Post-Career Success

The right financial advisors can help you navigate the complex financial landscape, assisting you to make smart decisions that will benefit you in the long term. Here are some key areas where advisors can support you:

Investment Planning

Post-career, it’s essential to make your money work for you. Financial advisors can help you develop a diversified investment portfolio tailored to your risk tolerance and long-term goals. This could include stocks, bonds, real estate, and business ventures.

Business Ventures

Many athletes transition into entrepreneurship. Advisors can provide invaluable support in evaluating business opportunities, developing business plans, and managing your ventures. Whether you’re interested in starting a restaurant, a retail chain, or a tech startup, having the right guidance can make all the difference.

Tax Planning

High earnings often come with complex tax obligations. A financial advisor can help you navigate these complexities, enabling you to take advantage of tax-saving opportunities and stay compliant with regulations.

Estate Planning

Protecting your wealth for future generations is crucial. Advisors can assist you in creating an estate plan that distributes your assets according to your wishes, minimizing tax liabilities and providing for your loved ones.

Retirement Planning

Even if you’re transitioning into a second career, planning for retirement is essential. Advisors can help you set up retirement accounts, plan for long-term care, and establish a steady income stream throughout your retirement years.

Risk Management

Life is unpredictable, and managing risk is a crucial part of any financial plan. Advisors can help you select the right insurance policies and develop strategies to protect your assets against unforeseen events.

Taking the Next Step in Your Post-Playing Journey

Transitioning from a professional athlete to a successful entrepreneur, broadcaster, coach, or executive is not just a dream; it’s a reality for many who have walked in your shoes. With strategic planning and the right financial support, you can turn your athletic success into lifelong financial stability and growth.

Remember, the game doesn’t end when you leave the field; it simply evolves. Embrace the opportunities ahead and put the right team in place to guide you through every step of your post-career journey.

How We Can Help

Our dedicated Entertainment, Sports, and Media team has extensive experience guiding professional athletes through all phases of their career journeys. We offer comprehensive financial services tailored to help you achieve continued success. Reach out to our team today to discuss how we can support your post-career goals.

How Pro Athletes Choose Winning Financial Teams

Key Takeaways:

Professional athletes need to assemble teams of qualified advisors to properly manage their complex financial affairs, just as successful CEOs build executive teams to run their companies.
The business manager or CFO plays the crucial role of quarterbacking the athlete’s daily financial operations — providing advice, serving as a gatekeeper, and coordinating the overall strategy with other advisors.
Carefully vetting and selecting a highly qualified, ethical business manager is essential, as many professional athletes have fallen victim to mismanaged finances.

As an athlete entering the draft, you are no longer just a player. You are now a professional, paid to play the game you love at the highest level. But along with the title “professional athlete” comes the weight of greater financial responsibility.

The financial profile of a professional athlete more closely resembles a mid-sized, private company than a typical household. While the economics can be exceptional, an alarming number of players lack the support structure necessary to navigate the depth and complexity of their financial requirements.

A professional athlete is the CEO of the brand that bears your name. To ensure the long-term value of that brand, you need to embrace this role and re-imagine your future beyond the playing field.

How to Assemble a Team to Support Your Athletic Career

Six-time NBA champion Michael Jordan once said, “Talent wins games, but teamwork and intelligence win championships.” This is just as true in the business world as it is in the world of professional sports. That’s why the world’s top CEOs make team-building their top priority. The way they approach that process serves as a valuable roadmap for both CEOs and athletes alike.

The Corporate Model

Most businesses share a common structural framework. While details may vary across different industries and global regions, the core elements of the Corporate Model (below) remain consistent. This framework identifies the primary business functions and areas of expertise critical to an organization’s success.

The Corporate Model has been successfully adapted to a wide variety of business categories, evolving as necessary to the unique needs of each organization’s operating environment.

The Hollywood Model

The film and television industry shares many traits with professional sports. The quality of the product is determined largely by the quality of talent in the spotlight — driving significant demand and high salaries for the best actors, directors, writers, etc.

Over the years, Hollywood leaders recognized that many of the same principles of growth and financial governance in the corporate world apply to talent in film and television. This led to the evolution of what we call the Hollywood Model (shown below).

This model identifies the importance of each individual role in the Corporate Model, albeit by different names. For example, the Chief Financial Officer (CFO) becomes the Business Manager, taking the lead on the client’s financial affairs.

The Sports Model

Over the past several decades, the financial lives of professional athletes have become increasingly complex. Salaries, endorsements, appearances, and other sources of income have grown significantly, and so have demands for athletes’ time and attention. However, the average player’s support system has failed to evolve at the same pace. The model below shows how the support team of a typical athlete compares to Corporate Model.

While professional athletes understand the importance of experience, expertise, and teamwork, they often lack a clearly defined model for building their teams off the field. The majority of highly publicized financial failures in professional sports stem from athletes who were either (a) missing key role players on their teams, or (b) trusting important roles to inexperienced or sometimes even unscrupulous acquaintances.

The MGO Model

At MGO, we have been fortunate to work with some of the most successful executives and entrepreneurs in the world — as well as many of the biggest names in sports and entertainment. As a result, we have come to know the traits and practices that drive success across industries.

The MGO Sports Model identifies and defines the roles critical to success — and aligns the work of leading advisors under a common vision. While each role is important, we encourage you to begin with the person who will serve as the quarterback of your daily financial life: your CFO/Business Manager.

Roles and Responsibilities of Your Business Manager

While each member of your team plays a vital role, the CFO/Business Manager is the person with the most tangible daily impact on your financial life.

Here are four ways your CFO/Business Manager contributes to your team:

Quarterback – Your business manager leads your financial operation, responsible for hands-on, real-time execution of the financial plan. This includes establishing budgets, paying bills, and monitoring the expenditures of anyone with access to your accounts or credit cards.

Advisor – Business managers serve as on-call financial advisors, working closely with you on your most important financial decisions — including family estates and trusts, marketing and name, image, likeness (NIL) deals, tax planning (including international tax), major purchases, potential investments, and charitable contributions.

Gatekeeper – High-profile athletes can be targets of investment scams and unwarranted requests for financial support. When these propositions come from friends, family, and former acquaintances, your business manager can serve an important gatekeeper function. By establishing a recognized first point of contact for all financial requests, most questionable requests can be filtered out before they reach you.

Strategist – Your business manager works closely with your entire roundtable of advisors, ensuring that everyone is aligned and working together to implement a common strategy.

Selecting a Trusted Business Manager

Despite the critical role played by CFOs/Business Managers in the financial lives of their clients, most states require no credentials to use the title. As a result, there are people with little or no accounting experience using that title today.

Many of the highly publicized financial challenges in sports and entertainment have stemmed from unqualified and/or unethical advisors serving in the role of business manager for high-profile clients. That’s why we suggest doing your own due diligence before hiring the quarterback of your financial team.

Things to consider when selecting a CFO/Business Manager:

Is the business manager a licensed CPA (certified public accountant)?
Is the business manager’s firm a licensed CPA firm?
What systems and certifications do they have in place to safeguard your money and data privacy?
What services will the CFO/Business Manager provide? For example…
- Financial Planning
- Bill Pay and Cash Management
- Tracking Income/Receivables
- Negotiating/Overseeing Major Purchases
- Overseeing Insurance/Risk Management
- Tax Consulting/Preparation
What types of reports will you receive? (ask to see samples)
How is bill pay managed? How are payment authorizations handled?
Do they have a dedicated staff? Do they have experience with similar clients?

Need Help Navigating the Complexities of Your Financial Journey?

MGO’s dedicated Entertainment, Sports, and Media team understands the unique challenges athletes face and provides tailored solutions that align with your goals. Reach out to us today to learn how we can help you achieve financial success beyond the field.

Top Strategies to Help Your Entertainment, Sports, and Media Clients Manage Global Income and Taxes

Executive Summary:

Agents and managers can help globally earning clients like professional athletes, musical artists, and entertainers strategically manage finances and taxes across borders to maximize earnings.
For U.S. citizens and residents earning money abroad, key areas for advisors to address include endorsement deals, royalties, foreign properties, foreign tax returns, and tax structuring that considers foreign investments.
For foreign (non-resident) athletes, artists, and entertainers performing in the U.S., considerations include but are not limited to U.S. taxable income, withholding rules, tax status, Central Withholding Agreements (CWA), and tax treaties.

As an agent or manager for athletes, artists, and entertainers, many of your clients likely earn income across borders as they perform worldwide. Strategically managing their finances and taxes is crucial to maximize earnings. Proper planning can help reduce tax burdens and avoid double taxation across jurisdictions. This allows your clients to focus on their careers while you may finesse your assistance to them in optimizing their income with guidance from tax professionals.

Understanding key tax considerations can enable you to put frameworks in place to mitigate your clients’ liabilities. For clients who are citizens or residents of the United States earning money abroad, all worldwide income must be reported to the IRS. However, foreign countries also tax income earned by non-residents. Assessing relevant tax treaties and structuring contracts in an appropriate manner can lead to more advantageous tax treatment.

When your clients have income from various sources both from inside and outside the United States, proactive tax planning is key. Common international income types to consider include:

Salaries from foreign leagues and tournaments
Performance fees from concerts and festivals
Royalties
Endorsements and sponsorships
Bonuses and prizes from international tournaments
Merchandise sales
Other income earned while playing or performing overseas

How these income types are classified and sourced impacts tax liabilities. Consulting tax professionals before your clients sign any deals allows for upfront planning that can keep more money in your clients’ pockets.

5 Key Considerations for U.S.-Based Athletes, Artists, and Entertainers Earning Income Abroad

If you are an advisor to musical artists, professional athletes, film actors, or other performers who are U.S. citizens, residents, or green card holders with foreign income sources, here are five important areas to address:

Endorsement Deals – How will the construction of a contract impact tax treatment abroad? Will the income be considered U.S. or foreign sourced? What are some ways to proactively plan for potential tax savings?

Royalties – Can royalties be classified differently if content is published while clients are abroad? How are royalties affected by collaborations with international artists? Is it considered U.S. income if royalties are received while playing or performing abroad?

Foreign Properties – What are the tax rules surrounding your clients purchasing or renting homes abroad (rules may vary by country)? Did you know that foreign rental income may need to be disclosed on a U.S. tax return? How do investments in foreign countries get reported and taxed?

Foreign Tax Returns – When is return filing required for extended stays abroad? Can foreign taxes be credited (and is the credit dollar-for-dollar)? What should be expected for payments received as a contractor versus as an employee? Which expenses are deductible in each country? For example, are agent fees, travel expenses, and entertainment deductible?

Foreign Tax Structuring – Is it better to withhold taxes on gross revenues or after deductible expenses? How do local, state, and regional (provincial, cantonal, district, county) taxes factor in?

With these areas addressed upfront, you can maximize income and minimize overall tax burdens for your clients as opportunities arise.

5 Top Considerations for Foreign Domiciled Athletes, Artists, and Entertainers Performing or Playing in the U.S.

If you are an advisor to athlete, artist, and entertainer clients who are not residents or citizens of the U.S. but earn income in this country, areas that could have an impact on your clients’ taxes include (but are not limited to):

U.S. Taxable Income – Is U.S.-sourced income taxable? What types of income may this include? Is there a requirement to file a U.S. federal income tax return? Is there an income threshold that must be met?

Withholding Rules – What are the withholding rules surrounding payments to foreign athletes, artists, and entertainers?

U.S. Tax Status – How is U.S. tax status determined — residency for income tax and domicile for transfer tax? How is taxation affected with or without a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)?

Central Withholding Agreements (CWAs) – A CWA is a tool that can help entertainers and athletes who don’t live in the U.S. by having U.S. income tax withheld based on the non-resident’s income. Is a CWA beneficial for the individual’s situation?

Tax Treaties – Does the individual’s home country have a tax treaty with the U.S.? How does it impact tax liabilities?

Evaluating options surrounding tax statuses, withholding approaches, and applicable treaties can mitigate liabilities and optimize tax treatment for your foreign clients.

Work with Tax Professionals to Help Your Clients Maximize Global Income

As an agent or manager navigating global income for your clients, working with experienced tax professionals is key. Advisors can assess your clients’ situations across jurisdictions to put frameworks in place reducing liabilities and avoiding double taxation. With the right global tax strategy tailored to each client, you can position them to pursue worldwide career opportunities with maximum income and minimum taxes.

Need help navigating the world of international tax for athletes, artists, and entertainers? We have experienced professionals dedicated to both international tax and entertainment, sports, and media (ESM) ready to answer all your questions. Reach out to our International Tax Team today.