Business objectives, structure, budgeting, taxes, copyright, filing, and resources
The Business of Writing may not be the fun stuff, but it will help you make money and stay out of jail. Those seem to be pretty essential goals.
I'll preface by saying I'm not an accountant, lawyer, or financial planner. Do not consider this as professional advice, but this is what I've done. I'd recommend you address each of these items in your own way - ideally with the counsel of some professionals. Handy reference books are noted at the bottom of this article.
Let's start broadly and work into more detail:
Business Objectives: why are you writing this book?
Legacy: perhaps you just want to capture some family stories as part of your legacy and publishing (beyond print store copying and binding) is not really your goal.
Calling Card: maybe this book will be your business calling card. Profit directly from book sales is secondary and perhaps at a loss, but handing out your book builds your business' credibility.
Book Sales: perhaps your primary objective is to publish a professional book and seek to make money through publishing, marketing, and speaking.
These are all quite valid and only you can decide which one, or which combination, truly is your objective. Your choice can guide you on other business decisions.
It is worth noting that there may be different guidelines/requirements by state, so check with your Secretary of State (SoS) office, along with your accountant or lawyer. There are many websites that provide services to properly set up your business. However, they charge hundreds of dollars or more and you should be able to handle the paperwork yourself through the SoS office and/or your accountant.
If your objective is Legacy, I would not worry about a structure. This is a low-cost personal project. Let's not complicate it.
If your objective is Calling Card, you may want to include revenue/costs of the book in the business which you are supporting with the book. You may already have the structure setup or you may need to set one up with your primary business as the driver.
If your objective is Book Sales as defined above, I would suggest you consider setting up a proprietorship LLC.
You don't need to be incorporated or anything complex like that (though there may be some savings if you choose that route now or later). The LLC provides you with some liability protection. If something happens (someone slips and falls in your office or sues you for something in your book) it protects your personal assets. Because it is a proprietorship, you don't need to file a separate tax return, just a Schedule C that captures your revenues and. business expenses, the effect of which flows into your family tax return (Form 1040).
Setting up your business structure will include getting an EIN (business registration number), registering your business name and structure, registering to pay state/local sales taxes (see below section), and likely securing a website, domain, and email addresses for your business (see our website and blog article from May). You'll also need to buy ISBNs for each book/media (eg, one ISBN for paperback, one for ebook, one for audio, and another set for the next book). While some companies including Amazon offer ISBNs, I strongly recommend you buy yourself to maintain full control of your book and future sales.
Costs for business setup could range from around $250 to $1k+ depending on if you register yourself or hire someone and whether you skip the website (not recommended) or create one yourself vs. hire a professional designer and SEO artist.
Realistic Book Sales
This is tricky! We all may have aspirations to secure a 6-figure royalty deal and sell tens of thousands of books or more. I hate to tell you the average author sells about 250 books a year. And when you strip away the Stephen Kings and J.K. Rowlings of the world, our average book sales are certainly lower.
I don't want to discourage you. Greater sales are possible if you produce a well-written, professionally-edited book with a great cover and plenty of supportive marketing (see our autumn blogs). So aim high but have realistic expectations. If your objective is Calling Card, understand how much you are comfortable to lose on book costs/sales to support your primary business. If your objective is Book Sales, must you turn a profit to put food on the table or is profit just a "nice to have?" In either case, you want to ensure you have a budget to guard against unwanted losses. As covered in the Publishing article in June, different types of publishing take longer (from about 6 months to 2+ years), cost more out of pocket (hybrid), and generate more royalties per book (from roughly $1 traditional to $5 independent on a $20 list price). So if you crunch those royalties on expected sales volume, you can see it likely doesn't generate much revenue to cover publishing costs much less profits.
Marketing, which we cover in some fall articles, is critical to keep the book in front of your target audience. Some are free (most social media) and some are costly (ads or hiring a marketing consultant). Depending on the timeliness of your topic, sales could be short-lived or extended for many years, but all need some marketing to promote sales. Again, this may not be critical for Legacy or Calling Card authors, but certainly is for Book Sales authors.
As mentioned above and in our Publishing article, revenues and publishing costs can vary wildly. You could self-publish including your own editing and cover design for nearly no cost, self-publish professionally (hiring contractors for editing and cover) and pay $2-5k, hybrid publish for $10-$15k, or traditionally publish and perhaps avoid all costs if you have the patience and fortune to get picked up by an agent and publishing house. In either case, making up these costs (plus business structure setup costs noted above) will often require (much) more than 250 in book sales. Hence, back to the importance of understanding your business and profit objective, as well as your marketing approach. I would start with a simple spreadsheet to estimate your revenues and expenses and thus map out potential profits.
Revenue: for your book business, this is primarily book sales. Most sales are one at a time. However, depending on your topic, connections, and initiative, bulk sales to audiences, businesses, colleges, etc could be lucrative. Additional revenue may include speaking engagements, in-person classes, online webinars, or coaching and consultancy. If you have an existing business and clientele, that can certainly help generate more revenue sooner. If you are just starting out, don't be surprised it can take years to develop your message, your platform, your audience, and your material to create such secondary revenue. Budget accordingly.
Expenses: are any costs associated with your book. Publishing costs are certainly prominent. But don't forget to budget for business setup, sales taxes, impact on your family taxes (see below), website/domain initial and renewal costs, writing and/or business coaches, books and other resources to further your writing craft, media mail costs if you sell off your website, as well as your publishing and marketing knowledge, writing conventions or conferences where you may find your target audiences, book tours (which are great ways to engage with the audience and build your skills but rarely are lucrative). You want to be sure to include any and all legitimate business expenses which may also include office supplies, computers/printers, office space in or outside your home, mileage on business errands or trips, travel expenses including airfare, hotels, cars, and meals when you are on book tours or even writing research. While we all do want a profit, legitimate expenses do help you defray costs and reduce your family tax liabilities.
Sales & Income Taxes
Depending on your state and local laws, you will likely owe sales tax on your book sales. This is often done by reporting your sales quarterly to the state which also collects on behalf of your city and/or county. Consult your accountant if you sell/ship books out of state or if you travel out of state and sell books out of your home state. Also, be sure to understand what your distributors like Amazon and IngramSpark are doing for you. Often they are collecting and submitting sales taxes for you so you definitely don't want to report/pay sales tax twice. Regarding income taxes, you will need to provide all your business-related income and expenses to your tax accountant who will complete your Schedule C etc for you. Yes, you may opt to do your taxes yourself but it will get a bit more complicated and, in my opinion, is worth having an accountant familiar with family and independent businesses to ensure it's done right. You can also usually tap this expertise during the year for answers on business/tax questions.
First, your book is technically protected under copyright as soon as you write it. Some writers email the manuscript to themselves for additional protection. You may also register with the US Patent and Copyright Office but this is not necessary. Many people are concerned about sharing chapters or whole manuscripts to beta readers or social influencers etc. While your book is copyrighted so if they "steal" material you can go the legal route, chances are it is not greatly infringing on your business or profits and is not worth the legal hassle and costs. In my 5 years and 3 books, I've not had any problems with this but it can happen. Also regarding copyright, be sure you are not infringing on others' copyright. Paraphrase, don't copy, reference material or images, obtain a license for cover images if necessary, don't include song verses beyond a few words in your book (or website). There are lots of copyright laws that you may wish to delve deeper into in order to ensure your compliance.
All this requires a filing system. Nothing elaborate is needed but you need to collect your revenue and expenses for easy access to government entities and for tax filings. I suggest a spreadsheet that you update monthly with the receipts you collect during the month. That will make quarterly sales tax and annual tax season much simpler.
Resources: The Business of Being a Writer (2018) by Jane Friedman (no relation that I know of); The Nonfiction Book Publishing Plan (2018) by Stephanie Chandler and Karl W. Palachuk; Other books/podcasts on my Resource page.
Keys to Success:
Be clear about your business objectives.
Hire professionals to support your business (esp tax accountant, perhaps an attorney for more complex businesses).
Have reasonable expectations and budget accordingly.
Work your tail off to expand sales (unless your objective is Legacy). Marketing does generate sales, but you need to market YOUR way. See our fall blogs.
I will cover recognition in August - reviews, contests, awards, and feedback.
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