Author Q&A: Should I incorporate or form an LLC if I am a self-published author?

Screen Shot 2015-05-18 at 6.22.53 PMThis is a very common question, but there is no single answer to it. This decision depends largely on the personal preferences and goals of the author. I covered the topic of selecting a business legal entity on this blog earlier. You can read the post here.

Below are some points to consider, relevant to authors:

  1. Self-publishing can be daunting. This is why many beginning authors decide to first publish under a sole proprietorship. Some just use their name, and others secure a fictitious name (following applicable state and local regulations.) Most open a separate bank account with their personal SSN (social security number) for their writing and publishing expenses and royalties.

As stated in my previous blog post, a sole proprietorship does not protect the author from personal liability arising from the writing and publication activity. For example, if the author defames someone or uses images under copyright by another in a book they publish, they can be held personally liable for these acts.

  1. Other authors create a separate legal entity (e.g., S corporation or LLC) to operate their writing and publishing business. If set and maintained properly, this can provide them with personal liability protection. The legal entity will have a separate EIN (employer identification number) to identify it, and the business will open its bank account(s) and pay taxes using this number. Additional filings will be necessary to comply with federal, state and local regulations for taxes, payroll, and other requirements, depending on the entity selected.

It is important to know that the creation of a legal entity does not automatically protect the owner from liability. Legal formalities must be followed in order to properly maintain this legal entity under applicable law.

In addition, there are costs associated with creating and maintaining a separate legal entity, such as filing an annual report, securing applicable license(s) and filing separate tax returns. There is also a cost associated with securing and maintaining a fictitious name for a sole proprietorship.

It is important to consult with a knowledgeable attorney and a competent CPA to ensure the business is properly formed, maintained and operated consistent with applicable law.

More information about business legal guidelines can be found on my book:Does Your Compass Work? Practical Legal Guide for Florida Businesses.” (This book provides federal and state law guidelines for businesses in Florida, but it is useful for any business seeking to operate in the United States.)

Copyright © 2015 Yasmin Tirado-Chiodini. All Rights Reserved. This content is provided under a Creative Commons License.

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About tiradochiodini

I am a attorney, entrepreneur and author blogging about business, law, entrepreneurship, writing, books and other subjects.
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