Question 1
Happy New Year! So I've already signed my agent's agency agreement W-9 with just my name, but now I'm starting to hear about people using LLCs or other entities. Why are they doing this? How does this work? I haven't sold any books yet, but I'm hoping it will happen soon.
You can find this mentor, Camille Baker, here!
Hi! Thanks for your question!
I had this exact same consideration when I signed with my agent and filled out the W-9.
The top two reasons I’ve seen authors decide to LLC are:
They want the protection an LLC offers. No one can sue you, personally, for something book/author related and take your house or assets. They can sue your LLC, thus limiting your losses to your author money (if your adversaries win the suit).
They have a pen name and want to keep things separate from their real name. The only names your publisher will have are your pen name and LLC name for paying you, so as long as your LLC isn’t “My Real Name Inc” there’s no chance a flub happens and they leak your real name. (Not common, but it has happened. Tess Sharpe has a really good thread breaking down why LLCs are important if you have privacy concerns here: https://twitter.com/sharpegirl/status/1473742207790288896?s=21 )
My reason for looking into an LLC was because of money. I knew taxes were going to take a good chunk of whatever advance I got and if I could lessen that, I wanted to.
Long story short, it doesn’t cut your taxes. No matter if you file as a sole proprietor (the default of being self-employed) or LLC, my accountant told me it will be taxed the same. (For the record, I file in Illinois and taxes can vary by state.) The potential tax savings come if you incorporate (S-Corporation.) and really make a difference if you make over a certain amount. Here’s a good blog post about that:
https://writersblockpartyblog.com/2018/01/16/hi-writers-lets-talk-about-taxes/amp/
I hope this is helpful for you! I ultimately decided not to LLC, but the decision was “for now”. My book deal came quicker than I expected, and since I don’t have privacy concerns and I strongly doubt anyone will care about me enough to sue me, I figured I could revisit LLCs later between contracts. But since I hope to have a long career, the idea of having everything neatly organized under an LLC is alluring. And I hear it’s an easy process once you look up your state’s requirements.
Let us know if you have any follow up questions!
Camille
