Author, LLC

Monkey · Jan 21, 2008

I understand that some authors create LLC's for themselves. Basically, this makes it easier to write writing-related stuff off as a business expense and handles sticky issues like who gets creative control of your work if you die.

My husband and I both write, and my husband's parents supplement their income by being musicians. We'd like to be able to form a business where things like instruments and laptops could be considered write-offs and we'd have no questions about royalties or creative control or any of that stuff if one or more of us passed away.

I know that I'm not going to find all the answers here...I'm planning to visit a lawyer very soon...but I remember seeing authors setting up LLC's mentioned on another thread (which I cannot find for the life of me) and was wondering if anyone here had any personal stories, anecdotes, warnings, or whatnot to share on the subject before I jumped in headfirst.

Little Red Barn · Jan 21, 2008

My only advice would be talk with an expert accountant as well. Good luck!

ColoradoGuy · Jan 21, 2008

My accountant told me the main things are to make sure I actually make some money at writing and that I take great pains to keep my personal finances entirely separate from the corporate entity (which for me is a PC, not an LLC). The IRS wants to make sure you're not using tax-free dollars to fund your hobby.

Cate · Jan 21, 2008

I'm no expert but I don't think you really need to do an LLC if I understand things correctly. My hubby is a builder and he sets up LLCs for each house he builds for liability purposes. That way people can't come after him personally if something happens.

For a writer, you can just be an independent contractor, opening a business account in your name for your writing related expenses and payments. Tracking them seperately is crucial, but I don't know if an LLC is needed. It is an extra expense as well. Definately check it out, but that is my opinion. I didn't feel liability was much of an issue for me as a writer so...

My husband and I formed a partnership (he is a photographer) and we do business through an EIN # rather than a SS#. It works very well for us. The EIN is fairly simple to obtain--check w/ your state's business site for info.

As for rights--I don't know much about that--perhaps the LLC would protect you, but I would think filing for copyright would do it as well, although you'd need to see how you would pass that on....

Hope that helps a little! Checking back in to let us know what you discover would be great if you remember....

Good luck!

Monkey · Jan 21, 2008

Thanks for the feedback, everyone.

An EIN might do the trick...just set it up as a regular ol' business. Sounds simple enough.

I'll keep digging deeper.

Carrie R. · Jan 21, 2008

I deduct all my writing expenses as a sole proprieter -- just file a schedule C, don't have an EIN (which I think you have to have an LP or a LLC to obtain). I keep my writing income in a separate account, but before I had writing income I just kept very good records of all my writing expenses (even though they were often on my personal credit card). If you're not making money then you have to make sure you won't be treated as a hobby (general rule is that you have to make money 3 out of 5 years and treat it like a business) and I know a lot of writers to keep logs of words written, submissions, etc as back up to show these efforts.

There are a ton of small business publications on the IRS website (just google) and a lot that deal with the hobby-loss rule. For being written by the IRS, they're surprisingly easy to follow

Also, I'd ask about how/if copyright is treated differently when it's held by a coroporation -- I thought I read something a long while back about it not being as long but I could be wrong. Also, you can deal with who has creative control over your work when you die via your will -- Neil Gaiman has talked a lot about setting up literary executors.

As always, this isn't legal advice just some thoughts as you go forward. Let us know what you find out and good luck!

blacbird · Jan 21, 2008

I have created an LLC for my technical consulting business (unrelated to fiction writing). It wasn't cheap, but was necessary for one reason, and desirable for another. The necessary reason is legal protection. That's what the term "Limited Liability Corporation" ultimately means. It sets up walls protecting your personal assets from your business assets, in the event of the occurrence of any liability. And remember, in our litigious society, nobody ever knows what "liability" consists of.

The desirable part is taxation. This one is fuzzier, especially considering I laid out some big bucks to a lawyer to draw up the necessary paperwork (which resides in my files in a big black ring-binder the thickness of a hard-cover edition of Anna Karenina). I'm assured that, over a relatively short period of time, maybe three or four years, the tax savings pay off the initial layout. After about seven years, I'm not entirely convinced, but my accountant continues to maintain it's so.

The legal liability thing is, under my circumstances, fairly large. I'm not so sure it would be for a money-making writer, however, unless you're in the league of, say, John Irving, or Philip Roth, or Stephen King.

caw

JamieFord · Jan 21, 2008

I have an S-corp. My accountant gave me the pros and cons of a corp versus the sole proprietor thing and in his guestimation it was between $5-7k a year. More if I sell more books down the road.

I wasn't worried about the liability thing, I just wanted to maximize my tax savings.

With an S-corp, my spouse can be an employee, so her vehicle/insurance/gas can partially be deducted as well. When I travel for research, meet my editor, etc--she can deduct her travel as well. If we want to travel to Fiji for our "annual meeting," we can deduct...that kind of thing.

You have to pay yourself a salary, pay quarterly or monthly taxes of varying types, but if you're okay with the paperwork, I think it can save you a bit.

Also, with an S-corp, you can file for unemployment if you hit a financial dry spell, which is weird to think about.

My accountant recommended an attorney to draw up and file the paperwork with the state. It helped that that attorney was also a CPA in his previous life, so he was able to give me all kinds of advice. But, it wasn't cheap. I think the whole thing cost around $1200. I'm sure there's a more economical, do-it-yourself way...

Good luck!

Monkey · Jan 22, 2008

Whew. It's a lot to think about.

I'm pretty sure that a LLC isn't what I'm really looking for, and that's good to know. I don't want to go to an attorney and ask him to draw up paperwork for the wrong sort of arrangement.

The biggest thing that I've learned here is that I shouldn't go to the attorney acting like I know what the hell I'm talking about.

I'll go, ask a bunch of questions, research on my own if necessary, then go again. At least, that's what's seeming to be the wisest course of action right now.

My in-laws have supplemented their living with their music for years, but they've never really...er...mentioned it on any legal-type paperwork. Now, they really don't need the music money anymore, and are likely to put less effort into it and get less money out of it, but they'd like to be a little more official when it comes to paperwork...when you have a lot of assets to protect, you have to cover your...assets.

To make the amount of money officially being pulled in larger, and also to share what benefits setting up a company will bring (and so that no one of us gets stuck with all the extra paperwork), we were talking about "going into business" as a family. Two writers, two musicians.

We do work at these things, we do have expenses related to them, and we do get paid for them. I've had to fill out a W-9 already this year...but no one else has done any paperwork on their stuff.

So here we are. I'm just looking for personal opinions and doing a little checking around on the internet before my mother-in-law drags me into a law office. Thanks for the wide range of responses, everyone.

Author, LLC

Monkey

Is me.

Little Red Barn

haz own threads

ColoradoGuy

I've seen worse.

Cate

Never Bored

Monkey

Is me.

Carrie R.

Procrastinating, clearly

blacbird

JamieFord

giving resonant directions

Monkey

Is me.