This is the 14th and final article in my self-publishing series. I may add additional articles later, but next week I’m getting back to more regular content.
So, you’ve decided that you’re going to self-publish your books. You’ve read everything else I’ve written on the topic, and probably lots more on top of that. At some point, probably close to publication, you might stumble onto this question; what should you list as the publisher? It turns out, this is a complicated debate with no right answer. You do have to list a publisher on the copyright page, so you have to pick something. And you can’t list the company that prints it as the publisher, because they aren’t – they are just the printer.
Option A – just list your own name. “Published by John Q. Public.” This is perfectly fine and legal and there’s nothing wrong with this approach. There may be some slight stigma attached to this as some people don’t think self-published authors are “real” authors, and they might not like it. But those people probably aren’t your market base anyway.
Option B – just list a company name of your own inventions. “Published by John Q. Public Publishing”. or “Q-Pub Press” or whatever. This isn’t technically wrong or illegal in most states (double check your state laws to be sure), lots and lots of indie authors use this method. From a legal perspective this is known as “DBA” or “Doing Business As”. It’s understood from the purpose of taxes and liability that you and the company are one and the same and that you are liable for everything the company does, taxes included. Note: In some states you must register your DBA with the state’s Corporation Commission or other similar entities, so if you plan on using this route, be sure to cover your butt. The biggest disadvantage here is that if you are just using a DBA, especially one that isn’t officially registered, and another company comes along and adopts your name, you may have limited recourse. Say, for example, that you’ve been publishing for 5 years. You have dozens of books out, a website, a Facebook page. You’re all over social media. Then, suddenly you get a letter from another publisher that started six months ago insisting that you are using their name, and they demand a cease and desist on your part. If they created a formal, legal business, and you are using a DBA, especially one that isn’t registered, guess who will typically win that case? (Hint: not you). The end result will be that you’ll have to re-brand all of your books or fight them in court (with slim odds of winning). [Note: Should you ever find yourself in that situation, definitely consult a lawyer. I am not a lawyer and my advice should not be construed as actual legal advice.]
Option C – you create your own formal, legal company yourself. There’s a lot to this. It’s not a cut and dry issue. It’s a lot of work, but it also comes with a lot of benefits. But, it’s also a lot of work. So, you know that you can do it – it’s easy, I promise you can do it – the question is, should you do it? I’m going to spend the rest of this article trying to answer that question. I’ll give you the pros and cons of operating your own business. And, if you still decide that you want to do it, I’ll walk you through the basic process of starting a company.
In my mind there is one sort of important question that may influence your decision the most. If you had a formal publishing company, would you only publish your own books, or would you publish other people’s books as well? If the answer is “only mine”, then you might not want to go this route. If the answer is “others too”, then you might want to consider it.
Let’s start by talking about company types.
Sole Proprietorship – This is a company that you are the sole owner of. It’s the you show; you own it, lock, stock, and barrel, and you are responsible for everything it does, good and bad. There’s little difference between this and a DBA.
LLC – Limited Liabilities Corporation – This creates a separate legal entity and separates you from your business in every regard. If your business is sued, then your personal assets like your house, your car, and your personal belongings can’t be awarded as part of the judgement should you lose in court. But, anything the company owns, technically can. LLCs can be “single member” where this is one owner, or they can have multiple owners.
Corporation – A larger business entity that further separates you from your business. However, it also comes with a lot more regulations about operating, day to day governance, and other things of that nature. You can always change from an LLC into a Corporation if it becomes necessary down the road, but it’s really not necessary, in my opinion, for someone starting out.
Let’s talk legal protection for a moment. Does having a formal legal business entity offer you any kind of legal protections? That depends on your preceding answer and the type of business you have. (I would strongly recommend an LLC to start with, if you go that route). If you only publish your own books and you publish something that brings about a lawsuit, the petitioners of the suit can sue both the publisher and the author. So you’d be sued essentially twice. Even if you have an LLC, because they are suing you as an author, your assets are not protected from judgement. However, if you published other people’s books and they got sued, the petitioner might also name the publishing company. And, if you have it set up as an LLC then your personal assets are safe. So, it may offer some protection, in some cases, depending on the circumstances. It’s not a black and white answer, but it’s complicated. Consult a lawyer if you have specific questions.
What about taxes? Does owning a business help you on your taxes? Maybe. A lot of the answer to this question will depend on your income level both individually and as a company. If you don’t have a company, all proceeds of sales are reported on your personal tax form, and you would pay taxes on them. Depending on where you are at in the tax table, that might bump you into the next tax bracket. If you have a company, then all of the profit from your sales wouldn’t be reported on your personal form, just whatever salary you drew from the company. But, the downside is that as much fun as doing your personal taxes are, you get to do it again for your business as well. Hooray! So, will it help? Maybe. Maybe not. Talk to an account for specifics about your situation.
What about other things, like Money? Well, if you have a legal business, then that allows you to open up a business account with the banks. This definitely allows you to keep your business and personal finances separate. It also may provide different banking options; different interest rates, different transaction types, etc. Having a separate business account also allows you to build up your business credit (to a certain extent). Your business, as a separate legal entity, would have a separate credit rating than your personal credit rating (unless you are a Sole Proprietorship). But, due to Federal banking laws, the banks will not open a business account without a document proving that the business is legitimate (usually a “certificate of good standing” from your state’s Corporation Commission, and an Employer Identification Number (EIN)).
There’s also purchasing power to consider. If you have a business, you are able to take advantage of other things, like buying goods at a discount from Wholesalers. A wholesale business is a company that sells goods directly to other companies. The items they sell are typically below market value. Costco is technically a wholesaler, but they let the general consumer take advantage of the savings by buying a membership. Most wholesalers ask you to provide your business EIN when setting up an account as they deal only with other companies. So, by being a company you may have access to other markets and resources that regular consumer you might not. In addition to wholesalers, there’s also Amazon Business, where you can make a virtual store and sell products through that store. In my case, I have all of the books that my company sells listed. My company gets a cut from Amazon for selling it through the store, plus I get the regular royalties applied as well. I can also sell things like software, computers, or any other products that I think might be useful. As part of setting up your business you will typically apply (in most states) for a Tax License or a Retail Tax License. By providing this document to certain companies you can make purchases for your business Tax-Free because the expectation is that you will tax the customers at the point of sale.
A potential downside to owning a business is paperwork. The business has taxes. They have books (in the accounting sense) that must be maintained. They also may have annual reports due, based on the type of business that you own. If you own a business and you hire employees, then you have to decide if they are 1099 (contract employees) or if they draw wages/salary from your company. This is important because it determines whether or not you pay taxes on that employees wages and whether or not you may have to pay into unemployment insurance. And, in either case, you’ll still have to keep track of what you pay them so that they can have a tax earning document generated.
There are also less obvious advantages. For example, suppose that you are taking the plunge and working at writing full time. You may be ineligible for health insurance because you are now your own employer. But, if you have a legal company, and then you are listed as an employee of that company, it may be easier to get an insurance broker to underwrite a health insurance policy for your company that you can buy, which may include better coverage or lower deductibles.
The point is, the question – should I start my own business – is not something that should be taken lightly. Look at every angle. Ask lots and lots of questions. Look at places like the Small Business Association (SBA). I see far too many people who say things like “well, my accountant said that starting a business wouldn’t save me money, so I’m not going to do it.” and then you ask who else they talked to and the answer is no one. Finances is only part of the answer to the question. You really need to consider everything.
Okay, now, maybe you’ve decided that you want to do this. How? (This process only applies to American companies…I have no idea how it works in foreign countries, although I imagine some of the steps are probably pretty similar in premise).
Step 1: Decide what type of business you want to be.
Step 2: Pick a business name. Go to your state’s corporation commission and do an “entity name search” for that business name, see if anyone else has it registered in your state. If so, try again. If not, search it in Google, both within quotes and without quotes. Do any other businesses show up that way? Is the name you picked associated with something you’d rather not be? If everything checks out, make a logo and pick some company colors.
Step 3: write a business plan. There’s lot of resources on the web and the SBA website for this. The most important parts to pay attention to are the Key Individuals/Principals. This is your list of who’s running/owning your company.
Step 4: Go to the IRS website and apply for an EIN. It’s free, and it’s an online form. Provided that you are the owner of the company then the form can be approved electronically and you will be taken to a page with your tax ID on it. PRINT THAT OUT. Then save it. Put the printing in a safe place, scan it back into the computer and save it to your hard drive, to a thumb drive, and email it to yourself. It’s that important. If you do lose it, the IRS can look it up for you, but you have to call them, which means sitting on hold for 45 minutes.
Step 5: Go to your state’s corporation commission website, read up on the specific process for your state and download the necessary forms. Fill them out. Double check it. Then check it again.
Step 6: File the application. There’s usually a fee involved here. It typically varies between $50-200 depending on the state and type of entity. It usually takes 4-6 weeks to process.
Step 7: Wait for the letter from the Commission. Once you get it, it will include instructions about how to make an announcement. You have to make a public announcement of your business. There are only a couple of ways that are accepted. The most common way is to take out a classified ad for a certain number of days. Once you do, the paper will give you a document to send back to the Commission. Mail that in.
Step 8: Profit. (Just kidding – too much Cards Against Humanity). But kind of serious. That’s it. The Commission will send you a certificate of good standing and you’ll be in business – literally. After that, your Corporation commission will show your business as being in good standing.
Some states may have a slightly different process, different order, or additional steps. Your local SBA and Corporation Commission are the two best places to get questions answered.
I hope this series of articles has been helpful. Good luck on your publishing journey!