Starting Out on the Right Foot
If you are publishing your own book, then you are starting a small business. Your brother-in-law may be urging you to incorporate, while your neighbor coaches you on avoiding taxes. You are puzzled by EINs, ISBNs, and DBAs.
Let’s take this one step at a time.
Do you need to incorporate?
Highly unlikely. Incorporation provides little benefit to an author. In publishing, your greatest risks are infringement, defamation, and invasion of privacy. These claims are based on your conduct as an individual, so forming a corporation or LLC will not help.
Your business will be a sole proprietorship. Despite its name, a sole proprietorship may be owned by you alone or by you and your spouse. You do not have to file any documents with governmental entities to create a sole proprietorship. You do not need to give your sole proprietorship a business name, although I recommend that you do so. You create a sole proprietorship simply by going into business.
If you are combining efforts with one or more other people (other than your spouse), then you are forming a “general partnership.” Like a sole proprietorship, forming a general partnership requires no governmental filing. The partnership is created as soon as the partners agree to combine efforts to earn a profit. Your agreement may be verbal or in writing, but I recommend you capture it in writing. Writing down your partnership or collaboration agreement forces you and your partners to discuss issues you may be avoiding. In Self-Publisher’s Legal Handbook, I list issues to discuss among your partners.
Not everyone agrees with me. Some lawyers recommend you set up an LLC or corporation. But forming and maintaining an entity is expensive. That money is better spent buying business liability insurance.
What do you think?
Photo used under Creative Commons license: Money Jar by Tax Credit on Flickr.
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