Business Structure of Teams in relation to the NHL itself

Discussion in 'Fugu's Business of Hockey Forum' started by Rakunitz23, Mar 21, 2011.

  1. Rakunitz23

    Rakunitz23 Registered User

    Joined:
    May 17, 2010
    Messages:
    989
    Likes Received:
    0
    Trophy Points:
    0
    Hi everyone, I've got a question.

    I've never really thought about this until now, but since I'm an unemployed accountant studying for the CPA exam, I figured I'd put my every day knowledge of both Accounting and the NHL to the test.

    What is the nature of the relationship between the team, and the league, as far as the business structure is concerned? I haven't given this much thought, but think I've come up with an answer.

    I think each individual NHL team is an S Corporation (or C, not sure which), since each team has a President, CEO, etc. The reason I think each team is an S corporation is because of revenue sharing.

    For anyone that doesn't know the difference between an S and C Corporation, an S allows flow through of all income, meaning if Me and Sally owned an S Corporation that makes 100k a year, and we choose to split it equally, we each receive 50k, which is then taxed as our individual income. With a C corporation, if we owned the same 100k corporation, that 100k would be hit with corporate taxes. Then, whatever is left would be/could be paid out to us, assuming that is how its done.

    If each team is an S corporation, the revenue 'flows through' to the NHL, which is a Limited Partnership (based on the bottom of the NHL.com website). Then, this is where I'm sort of confused. I don't know if league revenues are reported to the NHL, and they receive checks from everyone, and then evenly disburse the total to all 30 owners, or what. If somebody was actually able to understand this dribble that I wrote, and knows the answer, it would be great if you could help me out
     
  2. kdb209

    kdb209 Registered User

    Joined:
    Jan 26, 2005
    Messages:
    14,870
    Likes Received:
    0
    Trophy Points:
    126
    The NHL is a a joint venture organized as a not-for-profit unincorporated association.

    All revenues generated by the league (net expenses) are distributed to the clubs. These Centrally Generated League Revenues include national broadcast deals (Versus, NBC, CBC, etc) and merchandise licensing (through NHL Enterprises, L.P.). A portion of these central revenues may be used for revenue sharing and the remainder is distributed evenly among all 30 teams. League operations are funded by annual dues which are assessed on all 30 teams.

    Each of the 30 teams are individual businesses with many different ownership structures - some are owned by individual owners, others by ownership/investment groups or by publicly traded corporations. Locally generated revenues remain with the clubs - except where committed by League governing documents (NHL Constitution/By-Laws, CBA, etc), ie revenue sharing, League dues, etc.
     
  3. GSC2k2*

    GSC2k2* Guest

    To add, NHL Enterprises (the trademarking entity of the NHL which holds all NHL and team marks) is a limited partnership. The structure was discussed in the Balsillie/Coyote filings briefly.
     
  4. LadyStanley

    LadyStanley RIP Fugu

    Joined:
    Sep 22, 2004
    Messages:
    75,590
    Likes Received:
    3,142
    Trophy Points:
    186
    Gender:
    Female
    Location:
    Sin City
    NHL Network seems to be a NHL company as well.

    Not exactly sure how it fits into the organizational structure of the league, but seems to be it's own entity.

    NHL Center Ice -- I know this is a product, but as I've never had it, I'm unclear if this is a service offered by the league or an entity. Same difference for NHL Game Center.
     
  5. Rakunitz23

    Rakunitz23 Registered User

    Joined:
    May 17, 2010
    Messages:
    989
    Likes Received:
    0
    Trophy Points:
    0
    Thanks a lot, lots of good info. What I was mostly curious about I guess is the revenue sharing portion of it. I know that the ownership group of each team is different, for example the Penguins are owned by the Lemieux Group, LP. Is the team itself an entity? I'm just trying to understand how revenue sharing is justified for accounting purposes. If each team is an S Corp or an LLC, then the flow through of revenue would make sense, at least to me
     
  6. kdb209

    kdb209 Registered User

    Joined:
    Jan 26, 2005
    Messages:
    14,870
    Likes Received:
    0
    Trophy Points:
    126
    All the details of revenue sharing are covered in Article 49 of the CBA.

    After the final HRR Report for the previous season is prepared by the Independent Accountants (with a deadline of 9/30), the League will issue a revenue sharing report to the teams and NHLPA. The report will indicated the total amount of revenue sharing, the amount of funding from each phase, the allocations for all receiving teams, and an assessment against each team required to contribute. The teams have 7 days to remit payment to the League and then the League has 3 days to send distributions to the receiving clubs.

    A second round of revenue sharing - from the final disbursement from Escrow (if available) - is defined in CBA Articles 49.7 and 50.11. After the Final HRR Report, the excess escrow funds will be transferred to the League, which will distribute them to the clubs in two rounds - the first to eligible teams with a payroll below the midpoint and then the remainder is distributed evenly to all 30 teams.

    How each team accounts for it is up to their accounting dept.
     

Share This Page

monitoring_string = "358c248ada348a047a4b9bb27a146148"