Wealth Management Archives - MGO CPA | Tax, Audit, and Consulting Services

3 Game-Changing Financial Tips for Student Athletes Scoring NIL Deals

Executive Summary:

Name, image, and likeness (NIL) deals offer athletes exciting opportunities, but also potential pitfalls if not approached strategically.
Athletes should educate themselves on taxes, carefully review contracts, and budget with long-term security in mind.
With guidance on financial obligations, agreements, and smart money management, athletes can maximize NIL benefits while safeguarding their futures.

You are a talented young athlete with a growing public profile. You’ve just been offered a Name, Image, and Likeness (NIL) deal, an opportunity that can put some extra money in your pocket or even, in some cases, make a more profound impact on your financial life. It’s an exhilarating time, but it’s also crucial to approach this new chapter with the right knowledge and mindset.

New Division I NIL Disclosure and Assistance Rules

The Division I Board of Directors recently made some notable updates to its NIL rules, which went into effect on August 1, 2024. Key changes include:

Increased NIL assistance: Schools are now permitted to assist student-athletes in identifying NIL opportunities and facilitating deals with third parties, provided the athlete discloses their NIL arrangements. While schools can help, student-athletes maintain full control over the terms of their agreements.
Expanded disclosure requirements: To receive NIL-related support from their school, student-athletes must disclose any NIL agreement valued at $600 or more within 30 days of signing the contract. This applies to both current and prospective student-athletes.
New NIL reporting platform: The NCAA has launched NIL Assist, a mobile-friendly platform that streamlines NIL disclosure, provides educational resources, and allows student-athletes to review service providers.
Post-eligibility insurance: The NCAA has also introduced post-eligibility insurance for all divisions, covering injuries sustained during participation in college athletics for up to two years after graduation. This includes up to $25,000 for mental health services.

These changes are designed to provide student-athletes with increased NIL-related support and flexibility while maintaining fairness and clarity in the ever-evolving NIL landscape.

Three Essential Financial “Plays” Every NIL Athlete Needs to Know

Whether you’re a college or high-school athlete, or the trusted advisor to a young athlete, here are three critical actions you should take to avoid common financial pitfalls associated with NIL deals.

1. Recognize Your Tax Obligation

One of the first hurdles you’ll encounter in the world of NIL deals is taxes. It’s essential to understand that the money you earn from these deals is subject to taxation. Many young athletes overlook this, often because they’ve never had to deal with taxes before.

To avoid potential financial trouble down the road, consider these steps:

Educate Yourself: Young athletes receiving payments from NIL deals are responsible for paying taxes on that income just like professional athletes. Take the time to learn about taxes, especially how they apply to your earnings. Understanding the basics of taxation will empower you to make informed decisions.
Consult a Tax Professional: Before signing any NIL agreement, consult with an experienced accountant, tax advisor, or business manager. They can help you calculate your tax obligations, identify potential deductions, and develop a tax strategy tailored to your situation. Along with ensuring any federal, state, and local taxes you owe are paid on time (avoiding penalties), a tax professional can also help you navigate more complex situations – such as earning income across multiple states.
Practice Smart Spending: Resist the urge to splurge on electronics, clothes, or cars as soon as the money starts rolling in. Create a budget that considers your future tax payments, living expenses, and financial goals. Staying disciplined with your spending is key to long-term financial success.

2. Execute Agreements Cautiously

Navigating NIL deals can be tricky. There are various state laws and school policies to consider, along with a number of legal “gotchas” to avoid. Here’s how you can safeguard your interests:

Seek Legal Advice: Before signing any NIL agreement, engage a lawyer with experience negotiating NIL and brand endorsements for athletes. An attorney with expertise in sports contracts can help you navigate the important terms in an NIL deal, such as money, exclusivity, length of the agreement, how the brand can use your name, image, and likeness, and an athlete’s delivery requirements. An experienced attorney will help you spot potential pitfalls and ensure the agreement aligns with your long-term goals.
Beware of “Standard” or Simplistic Agreements: When someone refers to a contract as “standard” or provides an overly simplified agreement, that should throw up a red flag. All it takes is the slightest language in your agreement to give a company unfettered rights to use your name, likeness and image in ways you never intended.
Follow Regulations: An experienced advisor will help you navigate specific laws and policies set by your state, school, and the NCAA regarding NIL deals. For example, you cannot share photos or videos in your team uniform with logos from other brands without first getting permission from your school or the brands.

3. Budget Wisely for the Long Term

While newfound wealth can be exhilarating, it’s crucial to manage your finances wisely:

Prioritize Needs Over Wants: When it comes to spending, prioritize essential needs over extravagant wants. Understand this financial windfall may be a one-time occurrence, so focus on building a secure future rather than indulging in immediate gratification.
Future-Proof Your Earnings: Instead of assuming this is a continuous stream of income, treat each deal as if it were your last. Create a budget that accounts for potential future earnings and uncertainties, ensuring you’re prepared for any scenario.
Explore Tax Mitigation Strategies: Consider tax mitigation strategies, such as retirement planning and deferral opportunities, to minimize your tax burden. Consulting a financial advisor can help you explore these options.

Make the Most of Your NIL Opportunities

The legalization of NIL in college and high school sports represents an exciting shift for young athletes. It can offer game-changing money, enabling you to take care of your financial needs, along with building your brand for future growth. But with great success also comes great responsibility. Even professional athletes who’ve reached the highest pinnacles of their respective sports can end up without the financial resources they need if they don’t plan ahead.

The good news is by recognizing the potential pitfalls and seeking professional guidance early in your NIL journey, you can better position yourself for long-term financial success. Remember, it’s not just about profiting from your name, image, and likeness today, but also securing your financial future for tomorrow.

How We Can Help:

Our Entertainment, Sports, and Media practice understands the unique challenges athletes face at all stages of their financial journey. Whether you need assistance with tax planning, contract negotiations, or financial strategy, we’re here to guide you toward a successful future in the world of sports and NIL.

This article was co-authored by Leron E. Rogers, Partner at Fox Rothschild LLP.

Music Artists: Are You Leaving Royalty Earnings on the Table?

Key Takeaways:

Royalty accounting errors and contractual breaches are widespread in the music industry, likely causing many artists to be underpaid.
A comprehensive royalty audit examines contracts, income sources, expenses, and more to uncover underpayments and leverage for better deals.
Even if no issues are found, an audit provides peace of mind by validating an artist is being compensated properly for their work.

As a music artist, you work tirelessly to create art and build your career. But are you truly being compensated fairly for your creative output?

The sad reality is that royalty accounting errors and contractual breaches are rampant in the music industry, leaving many artists underwhelmed by their royalty statements. Even if you feel like you’re getting paid properly, there’s a strong chance you’re leaving money on the table.

The Prevalence of Royalty Issues

Auditing an artist’s royalty statements nearly always uncovers issues, whether it’s money owed or contractual breaches.

With the complex, multi-layered way music royalties flow these days — from streaming services to publishers to labels — there are numerous potential points of failure where sums can go underreported or uncollected entirely. Add in the many publishing and record labels being sold or merged, and mistakes become extremely common — whether caused by accounting errors, improper/failed registrations, or misinterpreted or ignored contractual language.

Causes of royalty shortfalls include:

Registration issues like incorrect songwriter shares or wrong ISRC (International Standard Recording Code)
Improper royalty rates
Failure to pay bumped royalty rates after recoupment or certified sales levels
Publishers failing to collect from all royalty sources
Expenses improperly deducted from royalty accounts
Uncashed royalty payment checks going unclaimed
Lost/”leaked” revenue in accounting
Improper sample clearances

Even if the dollar amounts seem small at first, contractual breaches can create powerful leverage for artists to escape bad deals, reclaim valuable copyrights, or renegotiate more favorable terms.

“A client came to me when he was trying to sell his catalog. I found a billion streams that his publishing company missed. He would have sold his catalog undervalued,” said royalty expert Dan Sassone.

Uncovering Hidden Revenue Streams

So how can you determine if you’re being paid properly? Embarking on a journey to reclaim lost royalties begins with a thorough examination of your income sources and contractual obligations. By conducting a royalty audit, you can uncover missed opportunities, rectify errors, and ensure compliance with your agreements.

While auditing your royalties is undoubtedly beneficial, the intricacies of the music industry can pose formidable challenges. This is where having a team of knowledgeable professionals on your side becomes invaluable.

Experienced auditors will first comb through your contracts to verify you’re being paid per the agreed rates, bumps, and terms. They’ll check that all income sources (streaming, downloads, broadcasts, etc.) are properly registered and being collected. And they’ll scrutinize deducted expenses line-by-line to validate their accuracy and approval.

This holistic approach can bring to light both overt underpayments and more obscured irregularities that surface-level audits often miss.

Key steps in royalty audits include:

Source Verification – Scrutinize statements from royalty sources and streaming platforms to verify the accuracy of reported earnings. Even major platforms and publishers like Songtrust or BMI can overlook royalties.

Contract Compliance – Compare contractual terms to actual earnings to ensure adherence to agreed-upon rates and conditions. Reviewing your contracts with a fine-tooth comb can reveal inconsistencies between what you’re owed and what you’re receiving, such as incorrect royalty percentages or unreceived bonuses.

Identifying Discrepancies – Cross-reference data to pinpoint discrepancies between reported earnings and expected income. For example, instances of missing streams or incorrect ISRCs can result in significant revenue losses.

How a Royalty Audit Benefits Music Artists

As the industry’s royalty streams grow increasingly complex, taking a guarded stance with your revenue is good business practice. Your gut feeling is a powerful indicator. If you sense that something is off or that you should be earning more, chances are you’re onto something. Even if there aren’t any red flags, it’s still wise to validate you’re getting your full share for the music you brought to life.

Key benefits of royalty audits for musicians include:

Receive Compensation – If there is money that you should have been paid, you may be able to recoup some or all of it or negotiate another form of compensation. Through this process, we have helped artists recoup thousands to millions of dollars they might never have realized otherwise.

Gain Peace of Mind – Rest assured knowing that your earnings are being meticulously reviewed and optimized.

Identify Bad Actors – Determine whether discrepancies stem from contractual misunderstandings, administrative errors, or deliberate misconduct.

Support Legal Efforts – If you are involved in a legal dispute or pre-litigation, audit findings can help you address disputes, negotiate settlements, and safeguard your rights in contractual matters.

Take Charge of Your Royalties Today

Whether you’re a chart-topping sensation or an emerging talent, maximizing your earnings from royalties is essential to your long-term financial well-being. By conducting regular royalty audits, you can safeguard your financial interests, mitigate risks, and ensure that every note you play translates into the fair compensation you deserve.

How We Can Help

MGO is one of the only firms to offer in-depth royalty auditing services. Along with looking at payments, we also conduct a meticulous review of contracts, registers, rates, etc., to determine if anything is missing. Don’t leave hard-earned royalty money on the table — reach out to our team today.

5 Financial Pitfalls Athletes Can’t Afford to Ignore

Key Takeaways:

Athletes often face financial challenges despite lucrative careers due to mismanaging money or trusting the wrong people with their finances.
Common risks that threaten athletes’ wealth include entourages, unqualified gatekeepers, and financial short-sightedness.
Solutions to frequently seen financial pitfalls for pro athletes involve setting boundaries, seeking diverse advice, and adopting disciplined budgeting.

It’s an all-too-common story: A talented athlete makes it to the big leagues and scores a life-changing payday only to watch their wealth slip away.

In some cases, it’s the result of overspending or poor financial planning. In other cases — like we recently saw with Los Angeles Dodgers star Shohei Ohtani (you can read MGO Entertainment, Sports, and Media Industry Leader Tony Smalls‘ perspective on that situation in this ESPN article) — it’s trusting the wrong people with access to your finances.

The reason we see the same story play out time and again in the world of professional sports is simple: athletes aren’t trained to look out for red flags or be proactive about protecting their money.

But just as you would prepare for an opponent before a big game or match, you need to be aware of the potential financial pitfalls you may encounter as a professional athlete.

The Five Biggest Dangers to Athletes’ Wealth

The warning signs that an athlete’s wealth is about to take a turn for the worse are easy to spot – because it happens in predictable ways. Lack of experience and betrayals of trust are enough to take down all but the strongest financial foundations. The biggest keys are to understand it can happen to anyone, and take the simple steps to avoid these issues.

1. The Entourage

Friends from the neighborhood latch onto the athlete and live the celebrity life while being a persistent drain on finances and a source of bad ideas. The athlete has promised to “take them out of the neighborhood/poverty,” but forgets that before they can help anyone else, they need to put the oxygen mask on themselves first.

What to do instead: You can turn this potential risk into an asset. Take your crew out of the neighborhood but set them up to thrive. Whether through responsible small business loans, or education and career training, you can rise up together.

2. The Gatekeeper

Far too frequently, a long-time friend or family member lacking financial expertise assumes the role of “The Gatekeeper” for the athlete. This individual often makes ill-informed business choices and monopolizes access to the athlete, shielding their finances from scrutiny and preventing anyone from uncovering potential negative consequences.

What to do instead: Instead of relying on a single gatekeeper, assemble a roundtable of advisors AND meet with them together, as often as you can. Especially as significant financial decisions are being made. Carefully evaluate those you entrust with financial matters, considering both their motivations and competency in making sound financial decisions. If either aspect is lacking, guide them toward improvement or seek out individuals with the necessary qualifications and integrity.

3. The Tantrum

When finally rewarded for the work and discipline required to become a pro, many athletes go through a phase of feeling they deserve anything and everything. When advised not to buy luxury items such as jewelry or cars, the response often is “who the hell are you to tell me what I can or cannot buy!?” Increasingly disastrous financial decisions inevitably follow.

What to do instead: This one is on you. No one will ever truly understand what you’ve endured to achieve success, but you also have to keep one foot on the ground and understand how quickly you could lose everything you’ve worked for. The best path forward is to implement a budget with room to enjoy what you’ve earned that also has controls in place to ensure you’re building an unshakeable foundation for the future.

4. The YES Men

When someone in the athlete’s camp gets fired for not agreeing with a bad decision, the professionals hired to protect their client (like the agent, business manager, or lawyer) may mitigate any conflict with the athlete to avoid getting fired — becoming YES Men. They would rather ride out the impending financial storm rather than tell the athlete what he or she actually needs to hear. Once there are only YES men around, the end is almost certainly near.

What to do instead: Understand how getting different points of view on financial matters helps avoid financial hazards. Get into the habit of asking your team: “What could go wrong with this financial move?” The final decision is always yours, but there is tremendous value in advisors who feel confident sharing financial knowledge and experience, even when you don’t want to hear what you need to hear.

5. Financial Myopia

Athletes can have a defective vision of their financial future. The average career span in the NFL is 3.3 years. In the NBA, it’s 4.5 years. The NHL is 5 years. And MLB is 5.6 years. Sure, pro players may earn a lot of money. But after paying agent’s fees, taxes, and shelling out for a luxury lifestyle, there isn’t much left to support the non-playing years. Some athletes may think they can pull off another miracle in overcoming all odds to maintain their lavish lifestyle, but the most common result is a broke athlete.

What to do instead: Budgeting and planning are the keys here. Just remember it isn’t a “one or the other” situation. With the right mindset and approach, you can still live (relatively) large, while putting away enough to secure a future for yourself and your family. It just takes some self-control and a willingness to make the right decisions.

Overcoming Financial Obstacles by Building a Winning Team

Many athletes come into a level of money at a young age that no one is truly prepared to handle. Lack of experience and betrayals of trust are enough to take down even the strongest financial foundations. This is why it is essential to choose a winning financial team.

Too often, athletes split responsibilities between team members (frequently friends and family members), allowing them to operate in silos without any oversight. This sets the stage for financial trouble down the line. Instead, you need to build a team of professionals who work together, so you always have a system of checks and balances in place.

Remember, true baller status comes when an athlete can live like a king for a lifetime, not just a couple years. When you build a trusted team, establish a plan, and follow it through, you can live comfortably long after your playing days are over.

How we can help:

With more than 30 years of experience working with athletes, actors, and music artists, our dedicated Entertainment, Sports, and Media team understands the unique financial challenges you face. Our team will help you build a financial foundation to achieve your goals both now and in the future. Reach out to us today to learn more.

From Artist to Enterprise: How Top Business Management Advisors Help Today’s Music Artists Monetize Their Brands

Executive Summary:

The music industry has changed drastically, with artists now having more control over their careers and revenue streams beyond deals with record labels.
Artists today need to view themselves as enterprises with diverse income opportunities including live shows, merchandising, licensing deals, streaming royalties, content creation, and catalog sales.
To fully capitalize on these opportunities, artists must surround themselves with a team of expert advisors to help navigate all the financial, accounting, and business intricacies involved.

The journey to success in the music industry is no longer a straight line. While the path to earning substantial revenue previously only had one route — through a major label — those days are gone. The digital age has ushered in a new era, where artists have many direct pathways to their fans and an array of new revenue opportunities.

But with new opportunities comes new challenges. Today’s artists have to figure out how to navigate, manage, and optimize numerous complex revenue streams with little guidance. This is why having a trusted team of advisors is essential to ensure you are getting the most from your artistic output — both in terms of building your fan base and your financial future.

Here’s how working with a top advisor can help you transform from artist to enterprise, adept at building diverse income streams and overcoming any associated financial hurdles.

1. Live Performances: Looking Beyond the Spotlight

Live performances and touring remain pivotal for musicians to generate income. However, the financial success of a tour is not just about what you’re getting paid; it’s also about what you’re spending. That’s why meticulous planning is essential. From production costs to transportation, a trusted advisor ensures every dollar is accounted for before signing any contracts. Artists can also leverage performances for additional revenue through avenues like live streaming, behind-the-scenes access, or even concert films (i.e., Taylor Swift’s Eras Tour film). Advisors can help structure those deals to optimize the highest take-home payout.

2. Merchandising: Capitalizing on Brand Appeal

Merchandising offers a lucrative avenue to capitalize on an artist’s brand and deepen fan connections. Advisors can guide artists through various merchandising paths — from direct sales to brand collaborations to affiliations — to help them determine the best financial option. While direct sales may seem the most appealing on paper (where you might see numbers like “90% profit”), the associated responsibilities, such as sales tax management and warehousing, shipping, and staffing considerations, need careful evaluation. A seasoned advisor helps strike the right balance between profit and practicality.

3. Licensing and Sponsorships: Negotiating the Right Deal

Licensing and sponsorships have become integral to the music industry, with brands using music to sell everything from cars and sneakers to movies and fast food. Advisors play a crucial role in evaluating and negotiating these deals — ensuring you are getting fairly compensated for your name and image, and the opportunity aligns with your brand and goals. The evolving licensing landscape—with artists now able to self-publish and go through Spotify, Apple, and other platforms—has made getting licensing deals done easier. One independent artist we work with got a six-figure deal when a network went to TuneCore looking for music to use in a TV show.

4. Streaming Revenue: Making the Most of Royalties

Music streaming platforms dominate the music consumption landscape today. While streaming royalties may be lower than what an artist receives from radio spins, terrestrial radio cannot touch the real-time data streaming provides (providing demographics of who is listening to your music, where they are listening, etc.). When it comes to managing streaming royalties, it pays to have a trusted advisor to track your royalties across all platforms — analyzing streaming data and royalty statements to ensure proper payment and identifying any discrepancies. Advisors also can strategize royalty planning, including estimated tax payments on royalties to avoid penalties, and help negotiate more favorable distribution deals with streaming platforms, exploring creative arrangements and exclusive partnerships.

5. Creator Content: Creating a Consistent Revenue Driver

In today’s creator economy, valued at over $100 billion, creating content is a powerful revenue stream. Many music artists are augmenting their income to the tune of six-to-nine figures a year by creating content for TikTok, YouTube, podcasts, NFTs, as well as a variety of other media and platforms. Advisors can guide you in navigating the challenges that arise from managing online content revenue — which often trickles, and then floods in, from multiple sources, and can quickly become unwieldy without a system in place to manage it. Proper financial management, including tax planning and budgeting, becomes crucial as content creation becomes a more prominent income source.

6. Catalogue Monetization: Structuring Your Ideal Sale

High-profile artists like Dr. Dre and Justin Bieber have recently sold their catalogue rights for large chunks of change. Catalogue monetization is the one time you are in complete control of your asset; you can carve out whatever deal you want (10-year, 20-year, 50%, 80%, etc.). Advisors guide artists in choosing the right partners, structuring deals, and determining the extent of the catalogue to sell. Your advisor will also help you weigh the tax considerations of collecting royalties versus selling all or some of your catalogue (royalties are taxed at 37%, while catalogue sales are taxed at 20%), and set up your sale in the most tax-efficient manner possible (for example, installment sale vs share sale). This one-time opportunity demands careful deliberation, and having the right team advising on nuances is paramount.

Building the Team Around Your Team

Moving from artist to enterprise means building a team to help you succeed. Your advisors are your team around your team. Much like a corporation brings in consultants, having seasoned business advisors available when you need them will help you make informed decisions to grow your brand and secure your financial future.

How We Can Help:

Our Entertainment, Sports, and Media (ESM) practice helps music artists at all stages, from rising stars to legends, offering financial, tax, and business management services to help you build your brand and maximize opportunities. Contact our ESM team today to learn how we can help take your music career to the next level.

Growing Opportunities for China-Based Companies in the US

The explosion of China-based companies making their debut on US exchanges continues. Companies are finding the availability of capital and opportunity too attractive to pass up. Though the process is complicated, MGO has deep experience taking foreign entities public on various US-based exchanges, including the NASDAQ. In addition, MGO understands the Asia-based investment portfolio, distinct investment processes, and the varied business models for companies operating in Asia.

Alternative paths to US exchanges

There are a variety of reasons companies would prefer to avoid a traditional IPO. For those entities we provide tailored solutions during the entire go public process – or portions of it – including the pursuit of alternatives such as a Regulation A+ offering and reverse mergers. We help each client find the path that’s right for their unique needs.

Bridging cultures

Our China practice has the language skills and cultural understanding to navigate market complexities. Call or contact us online to find out how we can help you.

A Crash Course in Financial Literacy

Financial freedom takes time, patience, and just a little bit of know-how. That’s why MGO and Shondaland have teamed up to create an ongoing series covering all-things money. We call our creative collaboration Financial Literacy. Our blogs cover everything from 50/30/20 budgeting, to building your credit, to diversifying your portfolio. We make it simple and easy to understand, so you can get the information you need, when you need it.

The Basics of Financial Literacy: Saving and Investing >

The Basics of Financial Literacy: Getting and Building Credit >

The Basics of Financial Literacy: Everything You Need to Know about Diversifying >

The Basics of Financial Literacy: Budget Now, Enjoy Yourself Later >