I've often said I want to write. I want to be a writer. I love to write. I'm in the process of actually writing my first book, and I plan on self publishing it. My question is, for tax purposes, what is the best business entity to set up to get paid through, and to pay taxes through, for this purpose. Do I need to start a business to do so, or would I be better off in an independent contractor status?
Most business entities are set up for limitation of liability or for agreements to divide up ownership. There's not a lot of liability risk in self-publishing a book ... and you're a lone wolf in this.
If I were you, I'd probably just set up use a sole proprietorship ... maybe with a d/b/a if you want a company name. Just include the income/expenses on your income taxes (Schedule C is for business income). Set up a separate bank account for the business, and pay all business expenses (and only business expenses) out of that account. Pretty sure you don't need a separate tax ID number for a sole prop. business unless you have employees with wages. Your SSN would be your tax ID.
This is not the kind of advice you should be able to get for free, online.
But, in general, if a taxpayer operates a home business at a loss without a separate tax ID number, the taxpayer can deduct the losses from the income from his "day job." If a taxpayer operates a separate business, say a corporation, at an apparent profit, he can roll the profits back into the business and pay no taxes.
I wouldn't just consider the tax consequences, though. Operating a separate business requires...operating a separate business. Keeping separate accounts and records, documenting expenses and income, etc. It might even require filing an extra 3 or 4 tax returns per year (payroll taxes). Consider whether the hassle is worth the percentage of tax savings.
Also, there's no real start-up costs for a home business. A corporation requires filing paperwork with the state and paying their fees, and renewing. There may be fictitious business license issues and fees.
And, the whole tax structure could change in 100 days. Is this book written?
The book is partially written. I'm in the process of writing still. I am aware that I am getting ahead of myself here when I don't even have a finished work, but someone posed the question of what will I do once I'm done writing it, and it got me to thinking, so here I come.
If you don't mind sharing just out of curiousity what is your book about? I enjoy writing and have self published some stuff on the Amazon Kindle Marketplace and am curious to talk with othre writers as well.
If you want to publish your book on paper in traditional form it's tough finding pubishers and getting in with publishers from what I hear. You can self publish and sell your book on amazn and ohter sites but self publishing is not cheap and then you need to get an ISBN number for your book.
Here is a book I have on the marketplace...
The Kindle Marketplace is incredibly easy to use and self publish with. Basically if you have an amazon account you just setup a KDP publisher account which takes just a few clicks. Below I'll put the link where you go to sign up.
Basically you can write it as a word document or a PDF. You can design a cover yourself or I'd recommend turning to Fiverr and having someone make a professional cover for you. My curent cover is just a simple cover I made in word, however I'm having a 3d book cover made on Fiverr for $5 and I'll be changing out covers any day now.
Another tip I'd give you is put your book on a free promo for a few days. I did this and got over 365 downloads so now my book will rank pretty high in searches and ideally I'll sell some for actual money.
You can choose a 35% profit share or a 70%. Only downside of 70% is you can only charge between a certain range I think $2.99 an $9.99 however thats most likely where you should be priced anyway.
I'm somewhat new to amazon publishing but its easy, doesn't cost anything and you can sell and amke money with it.
I woudln't go to the trouble of setting up an LLC as there's not much liability with a book you can use your social and be an independent contractor basically.
victor still curious to hear about your book