Small business advice

4 years ago | SgL (Member)

Hi all - One of the questions I have for the writers who take donations/write as a source of income is how to set up the appropriate mechanisms to receive donations or payment for ebooks without running afoul of the IRS.

Should I be looking at small business books. Author blogs? Accountant blogs?

Should I already be setting up a business checking account somewhere to receive funds?

Do I have to set up a LLC?

Has anyone in the webfic world already covered these topics in depth? THanks.

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Responses

  1. M.C.A. Hogarth (Member)

    Posted 4 years ago

    I'd be remiss if I didn't point you at my business columns for artist-types here: http://mcahogarth.org/?page_id=1044

    In response to your specific questions: yes, get a separate checking account, it will help you with tracking/accounting.

    No, you don't have to set up a LLC. Most of the authors I know run as sole proprietorships. But check the local laws in your state (or country). Your library should have a book on local laws for small businesses. There should also be an arm of the Small Business Bureau to help walk you through it somewhere in town. I talk more about this in this column: http://haikujaguar.livejournal.com/804260.html

  2. Jim Zoetewey (Moderator)

    Posted 4 years ago

    As someone who's been doing freelance computer consulting for a while, I've had to deal with this.

    Basically, it depends how much you make. If you're making less than a few hundred dollars a year, it's not going to affect you much. You'll report it on your income tax, find that it lowers your return a bit (or possibly completely consumes it),and no big deal.

    If, on the other hand it passes a certain point, you will want to start filing your taxes quarterly. This will help avoid massive unexpected surprises come tax time. It's also pretty much required for self-employed people.

    What is the point where you should file quarterly? I'm not sure. Best to ask an accountant. To be honest, when I was making $1000 a month as a self-employed person, I didn't bother. It did make income tax time a little scary, but between my other job and my wife's, we sometimes got through with a small refund.

    I don't recommend it if you're earning any appreciable percentage of your income through your writing--and especially not if it's your only income.

    As for an LLC... I'd also talk to an accountant about that, but from what I remember, it didn't seem worth it to me. Basically, LLC's and similar ways of incorporating help save on taxes when you're making enough to pay yourself a salary. It also helps if someone sues you--they can only take the corporation's assets, not your house. Obviously that's more of a concern for a computer consultant than an author.

    That said, if you were creating a small press to publish yourself (or others), and you were regularly shipping out products, paying people for their work, and so on, it would be a necessity.

    So, in summary, before doing anything talk to an accountant (i.e. not me), but if you're not making much, you can probably just put it on your income tax.

    You might also consider calling your local IRS representatives. I did, and at the time, they recommended taking out a little more from my regular paycheck instead of quarterly taxes.

  3. ubersoft (Member)

    Posted 4 years ago

    I set up an LLC, but the main reason I did that was because LLCs give you protection if you're sued for any reason. And in Wyoming (where I set it up) single-member LLCs get protection both ways... i.e., if your business is sued, your personal assets are protected, and if you are personally sued, your business assets are protected.

    It seemed like one of those things that I probably wouldn't ever have to deal with, but it would be nice to have just in case.

    Curveball (Updating)
    A Rake by Starlight (Updating)

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