If the idea behind this post is overwhelming to you, please absolutely feel free to come back to it later once you're ready. But I've seen a lot of conversations about it lately, and wanted to jump in and explain a few things!
First things first, you're a business once you're an author. You're trying to sell things to a consumer.
And that means two things:
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Picking out a business name
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Deciding on a legal entity type
Business Names
When I say picking out a business means, I'm talking about two "names" that you'll need to make decisions on. The first one is your author name. And the second one is your publishing imprint name.
I can see your eyes widening, but just breathe. I promise it's not as bad as it sounds.
The author name, or pen name, in particular might be super easy. If you don't care who knows that you're writing a book (or books), then you can just use your legal name. Easy peasy, no decisions needed. However, many authors use a pen name that's different from their legal name, for a variety of reasons.
Common Reasons for Using Pen Names:
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Anonymity - Some authors don't want their author lives to intersect with their personal lives. Whether that's for safety reasons, or that they just are banking on being super duper famous and don't want people to stop them at the coffee shop when they hear their name yelled out
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SEO (search engine optimization) - If you have a name that is the same as someone really famous, you might consider using a pen name to ensure that your books don't get pushed back to page 13 of the Google search results behind all the news about said famous person.
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Personal preference - Maybe you just don't like your legal name. That's totally valid! I chose my pen name because my legal last name is hard to spell and hard to pronounce and that's the only reason. I don't mind who in my personal life knows I'm writing, I just wanted to make it easier for readers to say my name.
Okay...got it. But how do you decide on a pen name if you're going to make it different from your legal name? I personally recommend that once you've figured out your genre to scroll through the top 100 books in your genre on Amazon and see what other authors are doing. Do most of them have initials and just a last name? Or do they have full first and last names? And then from there, it really is totally up to you. Baby name generators are a good place to start.
So once you've decided the name that will go on your cover, now you get to decide on a publishing imprint name.
Now, wait. I can hear the "What do you mean publishing imprint? I'm self-publishing."
Yes, you are. This is an optional but highly encouraged step to create your own, individual, single-person "publishing house" and give it an official sounding name with "Press" or "Publishing" at the end. In a sea of traditional published books, it adds an air of credibility, especially to booksellers and bookstores. It's not mandatory, and you don't even have to advertise it anywhere. It just goes in your metadata (we'll talk about that later) and helps you seem more legit.
As for what to name it...I am absolutely the wrong person to ask.
And now this part of the conversation leads us into the next part our next post, which legal entity you should operate under!
Legal Entities
Allow me to present my credentials for even having the gall to talk about this topic. I have a degree in accounting (I know, I know, but I use it in my day job so shhh) and I do kinda know what I'm talking about. Only kinda though. This is not legal or accounting advice. Don't take it as such.
I will also not be telling you what you should do. In any of these posts. Rather, this course will be me presenting you all your options as unbiased as possible (sometimes its unavoidable...looking at you B&N Press), telling you what I do, and then letting you make your own decisions.
Okay, now that that's all out of the way, what do I even mean by legal entities?
Legal Entity: An entity refers to a person or organization possessing separate and distinct legal rights, such as an individual, partnership, or corporation. An entity can, among other things, own property, engage in business, enter into contracts, pay taxes, sue and be sued.
That's really fancy business talk for a person or a company who can do business things. There's several types.
Types of Legal Entities
For ease and complexity, we're only going to talk about the three most common legal entities that apply to self-published authors. If you're curious about the others, they are Partnerships (think law firms or dentists offices) and Corporations (think big companies, like Apple or Amazon).
|
Type of Legal Entity |
Definition |
Pros |
Cons |
|
Sole proprietorship |
A sole proprietor is someone who owns an unincorporated business by themselves. |
Not complicated to form. Taxes flow through onto your personal income tax. |
Legal liability is high. If you get sued, they can threaten your personal assets (day job income) as well as your business assets (writing income). |
|
Limited Liability Corporation (LLC) |
A business structure that can have one or many owners that protects its owners from personal liability. The number of owners determines how the business is treated. |
Restricts legal liability to only business income. If you are operating your business alone (no other employees), you can file as a "single-member LLC" and still be taxed like a sole proprietorship (called a "pass through entity"). |
A bit more complicated to form, as requirements and cost (yes, it costs money to form an LLC), vary from state to state. |
|
S-Corporation |
A business structure that is permitted under the tax code to pass its taxable income, credits, deductions, and losses directly to its shareholders. Is limited to between 1-100 owners. |
​Also a "pass through entity" so you are still taxed on your personal return. Even more tax benefits as you are treating yourself as an employee of your own business. |
Only smart if you're making $60,000+ each year, otherwise it will cost. Tax and annual filings are complex and will likely require an accountant. |
Oh my goodness that was a lot of legal information. If this was like speaking another language, let me tell you what I (and most self-published authors I've spoken to) do.
Start with a sole proprietorship.
In the US (sorry international peeps, US taxes are hard enough, I'm not trying to understand other countries), that means you simply fill out a Schedule C on your annual taxes with your business income and expenses. We'll talk about tracking that information in a later post, but just know you do need to track it (and track it well).
Once you start making some money, typically around $12,000 annually (or at the very beginning if you have a lot of personal assets), form an LLC in your state. Your tax process will still be the same: fill out the schedule C on your personal tax return.
Then, if you get super big and famous and awesome and you're making more than $60,000 annually, convert your LLC (because oh my god if you're making that much money you should definitely have one by then) into an S-Corp. An accountant will likely need to help you with that.
This is a lot of legal mumbo jumbo, I know and I'm sorry. But like we said earlier, we're running a business. So this is important stuff you need to consider.
If you have more questions, I am unfortunately not your gal, as everything I know is in this post, so I would recommend reaching out to an accountant or a tax professional.
All I'm gonna say is that you all better appreciate this post, because writing this up gave me flashbacks to college.