Today I am featuring an excellent post by my guest, Ellen King Rice, on the business side of this business. Ellen is a successful indie author of an engrossing series of mushroom thrillers set in the Pacific Northwest.
She also wrote the brilliant, hilarious standalone novel, Larry’s Post Rapture Pet Sitting Service.
So, without further yak-yak from me, here is Ellen King Rice and her advice on how to treat this business like a business.
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Moving from hobbyist to professional can be challenging in any field. For indie authors, financial numbers and formal paperwork matter. There are several steps, and the sequence of them can make life easier or . . . not.
The first step in finding a path through the thicket of “business stuff” is to remember past challenges conquered. For many people this may be recalling a first bicycle ride or an early cooking effort. For others there may be a wince as we remember that first round of playing “Hot Cross Buns” on an instrument. Whatever your early challenge was, you didn’t know everything when you started, but you learned quickly.
Today, let’s build a ramp up to a business set up, including tax prep work.
- Author’s name.
Search your name on the internet. Make sure you are aware of other writers, activists, artists and business people who share your name. In my case, there were several, including one who shared my middle initial. After some agonizing, I decided my author’s name would be Ellen King Rice even as my friends and family know me as Ellen Rice.
- Publisher’s Name
I highly recommend that you chose something other than your author’s name. This gives the writer flexibility to write in more than one genre. There are also times when the publishing house name gives a bit more cachet to projects. I chose Undergrowth Publishing.
- Tax Number
This requirement will vary by nation. In the United States, you will want an EIN tax number from the Internal Revenue Service. There is an on-line application here: IRS EIN application online.
The EIN is a Federal Tax ID number used to identify businesses.
Having a Publisher’s name and Tax number helps with getting a business license and a bank account. Of course, I didn’t know this, so I did things backwards and sideways. I tried to get a tax EIN and failed when I was faced with the question “What is your name?” I highly recommend brisk walks and much chocolate to break up paperwork-filing sessions.
- Business license
Again, requirements will vary by location and jurisdiction. If you are resident of the State of Washington, you can find the details here:
I chose Sole Proprietor for my business, but some writers choose to form a Limited Liability Company.
Do you need city or county licenses? In my area, obtaining a state business license triggered a letter from the city demanding I purchase a local license. It took some research, but I determined that the local vendor’s license did not apply to my circumstances (I live in the county, and I sell books on-line).
It’s wise to learn about your community rules, but often these rule sets only apply to those who are selling in person (i.e., your online sales aren’t part of the local tax structure). Even then, there are times when small vendors or special events like an arts fair are exempted.
- Bank account
With your writer/publisher names sorted, a Tax EIN and your business license number, getting a business bank account should be straightforward. Mine is with the Washington State Employees Credit Union. I was able to open the business account with $50 and a $5 savings reserve. This gives me an account for Amazon expenses and deposits. I also asked for a dozen checks, which the credit union provided as a courtesy.
Credit card? A business debit card is easy to request once your account is set up, but a business credit card is hard to get. So far, I’ve managed without one.
- Spreadsheet and Tax Forms
Last steps! At this point, it is wise to print off the small business end-of-year-tax form that you’ll be using so you can see the information required.
In the United States, this is the Schedule C “Profit or Loss from Business” form from the IRS website. We can use this form to set up a spreadsheet, by category.
We want things set up so a “Sum this category” command will make it easy to fill out the Schedule C at the end of the year.
Details matter. Take some time looking over the Tax form for your situation. Think of it as your End-of-Year Party destination. A party in the tropics requires different prep than a party with penguins. Knowing the lines to be filled makes for clever spreadsheet set up. And, yes, it feels wonderful to be fast and accurate at year’s end.
For Americans, pay attention to Schedule C, Part I which asks what your “gross receipts or sales” are (line 1) and your “cost of goods” (say, printing 30 copies of your book) for line 4.
Next look at Part II. Lines 8 to 27 list different expense categories you can report. Line 8 is Advertising, so I want an “advertising” category when I set up my writer’s spreadsheet for the year. Line 11 is “Contract Labor”, so I’ll set up that category too. My book cover designer fees can go here. Line 18 is “Office expense.” I set up Office Expense as a category and that’s the designation to house all my paper and printer cartridge charges.
DEFINITELY check in with a qualified tax advisor (which I am not!) to make sure what you are doing is correct before you file your taxes. All I’m encouraging here is to use the Schedule C as a guide to setting up bookkeeping for easy end-of-year number crunching.
Once you have slogged your way through all six of these steps, you should be well on your way as a writing professional. Be sure to celebrate!
Footnote for American tax filers: What happens if I don’t make money? After filling in Part I (income) and Part II (Expenses), I typically show a Net loss (line 31). That loss amount will go onto a Schedule One form, and from there to Line 8 of the 1040 form as a negative number, which will lower my taxable income.
Thank you, Ellen, for a wonderful and enlightening post. If we intend to sell books at book signings and conventions, we have a business. If we want to avoid problems with our respective taxing agencies, we must jump through the proper hoops.
The next post in this series will talk about book signings and book fairs, and tracking inventory for both tax and insurance purposes. When the pandemic eases and we can go back to having signings and in-person events, we need to manage our costs and protect our investments. This something we all need to consider no matter where we live in this ever-smaller world.
About Ellen King Rice:
I am a wildlife biologist who suffered a spinal cord injury many years ago. Although my days of field work are over, biology continues to intrigue me.
I am fascinated by sub-cellular level responses to ecosystem changes. I also like the predictability of animal behavior, once it is understood.
A fast-paced story filled with twists is a fun way to stimulate laughs, gasps and understanding. I work to heighten ecological awareness. I want the details and your new insights to remain in your thoughts forever.
You can find me and my books at www.ellenkingrice.com
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