We talk a lot about writing, but we haven’t really touch on the topic of formally creating a writing business.
This post lists types of business structure options you have, at least in the U.S., for categorizing your writing or (self-) publishing business.
Since I’m neither an accountant or an attorney, please seek out someone who is one or the other, to help you determine the best structure for your needs. All states should have (at least) similar categories; these are for New Hampshire businesses.
The full definitions (these are paraphrased) can be found via the NH Division of Economic Development site:
- Sole proprietorship – is a business with the least amount of legal formalities and simplest to form. You assume sole responsibility for the operations and finances of the business, including profit or loss.
- General partnership - is an agreement between 2 or more individuals, or entities/businesses, to jointly own and operate a business. Profit, loss, and managerial duties are shared among the partners, and each partner is personally liable for partnership debts. As entities, partnerships do not pay tax, but must file an informational return, while individual partners report their share of profits or losses on their personal returns.
- Limited partnership – offers some of the partners’ limited liability. It includes a general partner who organizes and manages the business and its operations, and limited partners who contribute capital, but have limited liability and assume no active role in day-to-day business affairs.
- Limited liability partnership (LLP) - is organized to protect individual partners from personal liability for the negligent acts of other partners or employees not under their direct control (i.e. licensed fields like law or medicine). Not every state has this category. Partners report their share of profits and losses on their personal tax returns.
- Limited liability company (LLC) – combines the corporate and partnership entities. Parties in an LLC control shares and their operational liability of the company is determined by their level of investment. However, like partnerships, income tax is not paid at the LLC level, but rather it is “passed through” and taxed at the shareholder level. It’s not an easy entity to explain or understand.
Two others categories are “C” corporation and “S” corporation. Each of these has shareholders and for the purposes of this conversation, aren’t what a writing or (self-) publishing entity would need – at least not immediatly.
But again, each of the above business structures has legal, tax, and other consequences. I’m a writer, not an attorney or accountant, but I think these details can at least give you a start if you’re considering turning your writing into a business, or you’re thinking about creating an entity to self-publish under.
Have you thought about turning your writing into a business at some point?
Lisa J. Jackson is a New England-region journalist and a year-round chocolate and iced coffee lover. She’s a sole proprietor and solopreneur. She writes fiction as Lisa Haselton, has an award-winning blog for book reviews and author interviews, and is on the staff of The Writer’s Chatroom. Connect with her on Facebook or Twitter.