Financial stability is just as important as player development when running a youth sports club. Ignoring key financial responsibilities—like tax compliance, budgeting, and cash flow management—can lead to costly mistakes that put your organization at risk. 

Whether you’re a nonprofit or for-profit, staying on top of these areas ensures your club remains sustainable and continues serving athletes for years to come. Here are five key areas you need to focus on to set your club up for financial success.

1. Choosing the Right Organizational Structure for Tax Purposes

Before you officially set up your club, you need to decide:

• Will your club operate as a business (for-profit) or a community-focused organization (nonprofit)?
• Each structure has different tax benefits, obligations, and compliance requirements.

For-Profit Clubs

These clubs are businesses and must pay taxes on their income. However, they have more flexibility in operating and using their profits.

Pros:

• Owners can take a salary and distribute profits.
• There are no restrictions on revenue sources (e.g., sponsorships, ticket sales, merchandise).
• There are fewer government regulations compared to nonprofits.

Cons:

• All revenue is subject to taxation.
• Cannot receive tax-exempt donations or apply for nonprofit grants.
• Must file business tax returns and possibly collect sales tax on merchandise sales.

Nonprofit Clubs

Nonprofits exist to serve a charitable or community purpose, such as youth development. If approved by the IRS as a 501(c)(3) tax-exempt organization, the club is exempt from federal income tax on qualifying activities.

Pros:

• Can accept tax-deductible donations from individuals and businesses.
• May be eligible for grants and government funding.
• Exempt from federal taxes on qualified activities.

Cons:

• Strict IRS regulations: profits must support the mission (not enrich individuals).
• Must file Form 990 annually to maintain tax-exempt status.
• Limited ability to engage in commercial activities (e.g., heavy reliance on sponsorships could trigger Unrelated Business Income Tax (UBIT)).

Key Tip: If you want access to grants, tax-exempt donations, and community funding, nonprofit status is often the best choice. However, it requires strict bookkeeping and legal compliance.

2. Tracking Revenue and Expenses

Accurate record-keeping is essential for tax compliance. Many clubs run into trouble because they fail to properly document income and expenses, which can result in IRS penalties or tax audits.

How to Keep Clean Financial Records

1. Use a Business Bank Account and Credit Card. Never mix club money with personal funds.

2. Track Income & Expenses Separately. Organize finances into clear categories:

• Income Sources: Registration fees, sponsorships, grants, merchandise sales, donations.
• Expenses: Facility rentals, insurance, coaching fees, travel, uniforms, equipment.
  • Keep Receipts for Every Purchase – Store copies digitally or in a filing system.
  • Use Accounting Software – QuickBooks, Xero, or other bookkeeping tools to simplify reporting.

Types of Income and Their Tax Implications

Key Tip: Nonprofits must track any unrelated business income (e.g., selling non-branded apparel for profit), as it may be taxable even for a 501(c)(3) organization.

3. Paying Coaches and Staff: Employee vs. Independent Contractor

Many youth sports clubs hire coaches, trainers, and administrative staff, but how you classify them affects tax obligations.

W-2 Employees vs. 1099 Independent Contractors

Misclassification Risk: The IRS audits businesses that incorrectly classify workers as independent contractors. If the IRS finds a mistake, the club could owe back taxes, penalties, and interest.

Key Tip: If the club dictates a coach’s schedule, training, and work methods, they should be a W-2 employee. Otherwise, they might be able to be classified as a 1099 contractor.

4. Identifying Tax Deductions and Credits for Youth Sports Clubs

Common Deductible Expenses

• Facility Rentals: Gym, field, or pool rentals for practices and games.
• Equipment & Uniforms: Balls, nets, jerseys, helmets, and training gear.
• Insurance: General liability, accident insurance for players.
• Travel Costs: Transportation, hotel, and meal expenses for tournaments.

Key Tip: To deduct travel expenses, keep mileage logs and receipts for gas, lodging, and meals.

Tax Benefits for Volunteer-Run Clubs

• Volunteer mileage reimbursement (IRS standard mileage rate).
• There are no payroll taxes on unpaid volunteers (but reimbursement for expenses must be documented).

5. Preparing for Tax Season: Avoiding Common Pitfalls

Clubs must be proactive about tax season to prevent financial stress and IRS penalties.

Year-Round Tax Planning Tips

1. Keep Monthly Financial Reports – Avoid last-minute scrambling.

2. Review IRS Forms – Ensure Form 990 (nonprofits) or business tax returns (for-profits) are filed correctly.

3. Save for Taxes – For-profit clubs should set aside money for quarterly tax payments to avoid cash flow issues. Cash Flow Forecasting and Profit First are excellent resources to help you organize your funds and manage your company’s funds.

Taxes might not be as exciting as a championship game, but handling them correctly is essential for your club’s long-term success. By structuring your club properly, keeping accurate financial records, and complying with IRS rules, you’ll ensure that your club thrives financially and on the field.

Need Help?

Managing your club’s finances doesn’t have to be a headache. With LeagueApps, you can easily import accounting reports into your financial, accounting, and bookkeeping tools—ensuring every dollar is accounted for and making tax season a breeze. And if you’re looking for expert financial advice tailored to youth sports organizations, check out Taryn Financial. With the right tools and guidance, you can focus on growing your club while staying financially strong.