Plotting Your Writing Business
Don’t let your finances be part of your imagination machine.
Recently I’ve been going through the process of buying a house and it has made me realize how horribly unorganized I am. Not a pretty sight. You know that quote “A messy desk is a sign of a genius”? Yeah, not true. I’m just a mess.
So lately, I’ve been researching a lot about how to get my writing business organized as we approach the new year. For so long, writing was something I did for myself, on the side, or for grad school. I didn’t make any money from it. But once you sell that first book, it’s time to start looking at writing as a business because before you know it you’re going to sell another book, eventually get royalties, get paid for school visits, book festivals and speaking engagements and more.
You might end up doing other freelance in addition to selling books, such as developmental editing, coaching other writers, or judging writing contests. You start to realize there are so many ways to earn money as a writer, which is awesome! But a lot of it is untaxed. If you’re like me, the majority of your income is untaxed. And therefore, I need to be my own boss, secretary, treasurer, and accountant. A lot of organization. I sold my first book in 2016, four more within the next two years, and I’m just now getting serious heading into 2020. BIG MISTAKE.
How To Plot Your Financial Life As A Writer (Or, How to Get Your $h*t Together)
- Organize from day one, even if your year of writing income is only a few thousand dollars, because what’s better organizational practice than to start small? I wish someone had pounded that into my brain, as well as these easy-to-do financial pro-tips that I’m going to share with you.
- Open a business bank account if your income is beginning to increase past a couple thousand dollars a year, so that all of your expenses and income run through that account rather than your personal. I wish I had done this about two years ago. Lesson learned.
- Invest in software that helps you categorize your transactions. I use Quickbooks for Self-Employed. I love this program but I don’t use it to its fullest yet. You can assign every transaction to personal or business or split (or make it even easier on yourself and open that business account!) and it will show you what your quarterly taxes are, create a profit and loss statement, and more. This came in very handy while processing our mortgage since I didn’t have the first pro-tip above.
- Save every invoice, receipt, check stub, 1099, and keep track of all business-related mileage and expenses. Get a pretty little file cabinet or throw them in a shoebox, but save them. Every time you use cash especially, get a receipt. At the end of every month, go to Quickbooks, or whatever you choose to use, and check and assign every single transaction.
- Pay your taxes. Seems like a no-brainer, but take it from me you do not want to get caught off-guard. It adds up super fast. If your income is sizable, pay your taxes every quarter. (Thank you Quickbooks!). This is my personal goal for 2020. Clearly, I’m a slow organizer. But I’m learning! (Note: You have to pay self-employment taxes once you make over $400 a year if it’s reported on a 1099.)
- Hire an accountant who understands what you do. There are so many deductions you can take as a self-employed person. Invest in an accountant who will take good care of you.
To LLC or Not LLC, That Is The Question
Let’s say you’re one of the few who make a very sizable amount on your book sales, like over 50k a year. If this is you, then you may want to consider incorporation. There’s a lot of debate over whether or not this is necessary because the primary difference between a sole proprietorship, which is basically what you are as soon as you make over $400, is that an LLC protects your personal assets, hence the name Limited Liability Company.
An LLC is not terribly different than all the pro-tips I just mentioned. You would still do all those things, and in addition you would file with your state for LLC status. Every state has different fees for this, so do your research accordingly. Writers aren’t necessarily in a risky business, however, where their personal assets are at risk and need the limited protection this offers. The biggest risk, but not a likely risk, is being sued for defamation, privacy or infringement.
According to Helen Sedwick, business lawyer and author,
“Most writers are not writing high-risk material. Fiction writers are rarely sued for defamation, unless they have been lax about masking identities…However, if you are going after Big Oil, Big Food, Big Med, City Hall, Wall Street, or any deep pocket, then you are taking greater risks. Instead of spending money on forming a corporation or LLC, you are better off hiring an experienced publishing attorney to review your manuscript. An attorney should be part of your publishing team.”
Lastly, she says,
“Unless you keep enough assets (money) in a corporation or LLC to cover its potential liabilities, AND you keep the entity’s finances separate from your personal finances, AND you keep up with certain formalities and state filings, your corporation or LLC may be disregarded by a court and not provide any protection.”
Because many writers earn a different amount year to year, incorporation may not be worth it. But for anyone who knows they will be accruing a significant amount income each year, it’s definitely a great option. And if you’re writing about a government controversy or something, maybe it’s a good idea to look into it for your own peace of mind.
For the rest of us, writing about pirates, monsters, steampunk teenagers or nearly anything else under the sun, we’re probably good with a simple business account, some good software, and a great accountant.
Jess Rinker is the author of Gloria Takes a Stand, a picture book biography of Gloria Steinem, and the forthcoming, Send a Girl: The Brenda Berkman Story, due out in 2021, both published by Bloomsbury. Jessica’s middle grade novel debut duology, The Dare Sisters, will be published in Fall 2020 and 2021 by Imprint/Macmillan.