Some things you want to consider when setting up a publishing company as a business entity are your tax incentives and how much you want to protect your personal assets, such as royalties and copyright.
While there are tax incentives, they depend on factors like how much you make and where you are located, as well as what type of company you create. It’s important to consider this information before deciding to create a publishing company.
As an author, you should start thinking about setting up a business when you begin collecting around $1,000 or more per month in the U.S.
One reason for this is so that it’s not all subject to employment taxes for you, as an individual. Forming an LLC, taxed as an S-corp or C-corp, depends on your income and these would be good options to discuss with a lawyer or CPA.
When it comes to copyright, having that under a different LLC than where royalties are held will separate your cash in the event someone asserts a claim against whoever owns the copyright. Having the copyright under an LCC, separate from your personal assets also protects it in the event you are personally sued.
If you reside outside the U.S., though, any distributor that's going to pay you royalties is going to withhold 30 percent. The key to mitigating this is establishing a domicile in the U.S. by doing it with a business entity. Coons suggests using Wyoming for his international clients set up an LLC in because it’s relatively inexpensive to do so in that state.
Bio of the Author in the Case Study:
Clint Coons is a founding partner of Anderson Law Group and current manager of Anderson’s Tacoma office. Mr. Coons’ book, Asset Protection for Real Estate Investors, has brought him national recognition as an expert in protection and tax planning for real estate investors.
His practice involves the structuring of land trusts, limited liability companies, and other business forms to shield investors from the myriad of challenges facing them in the new economy.