Business incorporation for self-publishing

[Flash1]

I know the great importance of protecting yourself with a business entity with any new business, but I wanted to know is it necessary to incorporate for releasing your first small E-Book over on Amazon?

I've been reading the threads here, and I haven't found a clear answer. In a Google search I read differing opinions; some say yes, while others say it's not necessary.

Can I please get some feedback on this matter by the experienced writers here. Thanks in advance!

 

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[ChickenHawk]

I'd love feedback from the more experienced writers too. But as someone relatively new to this, I can tell you that I didn't incorporate. At least not yet. To me, it seems like overkill when you're just starting out. I'd suggest that your time and effort would be better spent putting out your first book or two, and then evaluating what you'd like to do on the incorporation front.

Any other opinions? Since I'm new to this, I'd also be interested in what others have to say.

 

[COSenior]

Incorporating serves two main purposes; protection from liability and certain tax advantages. Speaking as a small business operator here, not a lawyer. If you're not doing anything that could result in liability, like plagiarism or libel, or making enough money to make the tax advantages save you more than the cost of incorporation, I'd say it's too early to be thinking about that. Be sure you're solid on your fonts, covers, anything that could be copyrighted, and you should be fine until you're making quite a bit in royalties. I've seen figures ranging from $25k to $120k net as making sense to incorporate for tax reasons. Based on past business experience, I'd lean more toward the higher figure.

 

[harerace]

I'd suggest that your time and effort would be better spent putting out your first book or two, and then evaluating what you'd like to do on the incorporation front.
Any other opinions? Since I'm new to this, I'd also be interested in what others have to say.

You're correct!

 

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[Flash1]

Good advice COSenior, thank you!

 

[AubreyRose]

Agreed on all counts with the posters above. I'm only looking into incorporating now because I'm expecting a big year. Last year I was making $1k/month or so and it wasn't worth it; this year is more like $10k/month so I'm stressed over having to pay a ridiculous amount of taxes unless I can shelter it somehow...

Have any of you incorporated yet? How did you structure your business?

 

[AubreyRose]

Oh, totally forgot to mention this: there are plenty of ways you should be sheltering your extra cash anyway. IRA, 401k, HSA, and now I have a solo 401k set up so that I can contribute 20% from my self-employed royalties as an "employer" and put in more than the individual limit. Anything else I'm missing?

 

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[RobP]

But what if you're using the book to drive people to a website?

Should you incorporate before setting up the site or even selling the first book to use the hosting, domain, and other miscellaneous expenses as deductions?

And if you're not incorporated, what form(s) do you file taxes with? Is a 1040 all you need? Thanks.

 

[COSenior]

Once again, a disclaimer. You should check with a tax attorney or a CPA for expert guidance. I am neither, however, to my knowledge, all the expenses you mentioned can be deducted on Schedule C as a sole proprietorship, there is no need to incorporate for that reason. When you file Schedule C, you may include income from the 1099 you'll receive from Amazon, but you are required to report all income, with or without a 1099. Filing Schedule C does subject you to more scrutiny from the IRS, or so I've heard, but as long as you have your ducks in a row, you should be fine.

When you do incorporate, look into a Limited Liability Corporation (LLC), rather than a C-corporation. I'm not prepared to spend the time to lay out the reasons, but one is double taxation under a C-corp. Look it up or consult an attorney for advice.

BTW, I learned everything I know about income tax filing (which is nowhere near expert level, I'll admit) from a two-day course I took on the subject for real estate agents. I highly recommend that anyone who is starting a business of any size go to something like it--most large towns will host one or more each year--and then hire an expert tax preparer to do the actual work. In my experience, they are worth more than their fees in extra refunds, but you need to understand what they're doing to be sure. Check with your local Chamber of Commerce to find out who might be hosting. The day or half-day will be well worth your time.

 

[RobP]

Thanks so much for the reply. I'll get to work on your recommendations right away.

 

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[AroundTheWorld]

along the same lines, I've been thinking about what sorts of expenses *could* be deducted for a writer....

travel if you are setting a book in a particular place?
materials for a hobby or activity if that particular hobby or activity is important in a book?

it *could* be argued that these expenses are research.

Anyone have a resource / more thoughts about writing and deductions?

 

[COSenior]

Definitely travel, that's one of the huge perks of any business where on-site research is required or even desirable. There are special rules for travel deductions, though, so be sure to be aware of them. I don't know about hobby stuff, but I deduct all my Kindle purchases as genre research. Consult your tax adviser.

 

[JPBB]

Your computer, your internet connection (to participate in this forum about self-publishing), your cell phone (partially) to test how your book looks on a smartphone, etc. I think you can deduct a lot of things as long as you have backup proof and it's legitimately used in that way. Note: I'm not a lawyer or a CPA, just a plain old tax-abiding citizen.

 

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[COSenior]

Definitely your internet connection: to publish, to participate in writer's discussions (and I'd make a case for the INSIDERS's subscription, too), for research, and for marketing on social media. Absolutely essential.

 

[Daniel Jameson]

Incorporating allows the business owner to separate and protect their personal assets in case of a lawsuit or claims against a business entity. In an properly managed and structured company, owners have limited liability for outstanding business debts and obligations. This is one of the primary benefits to incorporating. The process needed to form either a corporation or an LLC is similar to a partnership, without the need for excessive paperwork and fees.