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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 118775
Experience:  All corporate law, including non-profits and charitable fraternal organizations.
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I'm searching information. I am a successful independent

Customer Question

I'm searching for legal information. I am a successful independent author publishing primarily on Amazon for the past four years and running my business as a sole proprietor. My business began with online retail sales, then morphed into the publishing.
My work consistently hits the best seller lists in my genre and over all my business is growing so fast I can't keep up with it. A sole proprietorship just isn't going to cut it any more. I need to adapt.
I'm looking at forming a small press LLC that will eventually publish not only my work but other authors too. There will also be work for hire situations.
Publishers typically have "imprints" that focus on certain genres. I also use a pseudonym on my own work, but it is also my brand. I handle cover design, formatting and marketing. I stay on top of the intellectual property aspect and copyright registration and file DMCA's when I find my work infringed upon (ebook pirates are so rampant it's ridiculous. I only file what I
Submitted: 2 years ago.
Category: Business Law
Expert:  Law Educator, Esq. replied 2 years ago.

Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.

What is your specific question for us about this matter?

Are you planning to want to treat yourself like an employee or are you happy just taking in your share of profits from the LLC or are you generating enough income that you would not want to claim all profits on your personal taxes?

Customer: replied 2 years ago.
Thank you for your response.Let me address the sole proprietor vs. LLC. I started four years ago. From month 3 of year one the business took off but I maintained my part time job. Year two demonstrated my publishing was viable and I quite the part time job to pursue it full time. Last year, I promoted my business like crazy last year and published a whopping six novels. My marketing expenses, editing fees, and stock image purchases doubled, which I expected.The profit margin which I expected to drop slightly because of the money I was putting back in did the opposite. It tripled in less than two months and kept right on steamrolling. I was staring at 11k in self employment taxes at the end of the year. I didn't expect that!I'm looking at an LLC because I feel the business is growing too big for a sole proprietor and I think an LLC might be smarter financially. But here's where it gets complicated. I publish in several different genres and have to produce a product that is the same quality if not better than the big 5 traditional publishers in NY. Many readers are gun shy of independently published works so I have sometimes extreme prejudice to overcome. There is no reason why the consumer should be able to tell the difference between my book and a traditionally published novel. I have three imprints for genre fiction (I use that term loosely since I haven't registered anything yet), another for cover and graphic design, and yet another for non-fiction.Would these "imprints" fall under the umbrella company be recognized under the LLC? Or am I leaning too much in the direction of full incorporation? Should I consider trademarking the main business? What about the imprints? Although I already know exactly the specific duties for each imprint, I'm not going to be in any position to even think of the word incorporated for awhile. I'm trying to set a foundation. I publish under a pen name and while the US Copyright Office says I can list it on the copyright registration or leave it off and just use my real name, my pen name has become my brand and I don't want anything to mess that reputation up.Because a pseudonym is barely a blip on the radar at the copyright office, I am wondering if I should take extra steps to protect it as my brand - but that would mean a trademark too. I think. I don't know if it would be effective or even possible because my business isn't that large yet.If I push the business toward a small press, I would be dealing with other writers both in more of a traditional sense of accepting their work for publication, taking the financial burden upon the company to edit and produce the book, and when sales start coming in, I would be, paying the author a royalty. That means I would need contracts for specific aspects with the authors, contracts for various forms of contract labor, and contracts for writing that falls under work for hire.I have a new business model set for the cover artwork and ready to launch, so there are well-defined avenues and a specific plan for each imprint name.When I first started my business I painted figurines on a commission basis and sold unpainted models and supplies retail over the internet. I registered a DBA with the county I live in, I have a sales and use tax account with the state, a Federal EIN (I needed it to get the sales taxes account set up - the state has since changed that requirement), but no employees (yet), and of course a business bank account. I had a specific name for this business but the bulk of my income came from painting and I quickly discovered I couldn't paint fast enough to pay the bills. However I was able to write and produce novels much more quickly so quickly shifted the business focus. Almost went belly up in the first year but changing to publishing was the answer. But I need to "officially" change the business name too.My goal was to eventually treat myself as an employee. I have the plan (to a certain extent) from the accounting and management perspective, the legal side is intimidating to say the least. I don't even know where to start looking in my own state for this let alone nationwide.Now I think I probably just made everything as clear as mud. ;)The attached files are just to give you a general idea. The first is the logo design I created for the cover art and graphics side of the business, the cover art I created for my most recent audiobook, and the last two are samples of the interior formatting I create with Adobe InDesign for both e-book and print on demand books. Each imprint would handle a specific genre - like Random House has it's nonfiction - Schoolhouse books but also has Bantam books which owns Del Rey which publishes SF/Fantasy fiction novels. I'm not incorporating yet but I would like to lay the groundwork and protect what I have thus far without bre
Customer: replied 2 years ago.
Woops missed the last sentence -I would like to lay the groundwork and protect what I have thus far, hopefully without breaking the bank.
Expert:  Law Educator, Esq. replied 2 years ago.

Thank you for your reply.

You are mixing up many issues into one issue here. First of all, you need to protect your works by copyrights, not by trademarks and that has nothing to do with whether you are an LLC or an S corp or a C corp or Sole Proprietorship. You also can trademark your company name and logo and again, it has nothing to do with the type of entity you are. Those things need to be done fairly soon if you are taking off like you claim.

As far as type of entity, this would be for tax purposes and protection from personal liability. If you are pulling in what you claim you are pulling in, then you need to consider being taxed as a corporation and then paying yourself a salary from the corporation (whether you do this as an LLC or S corp or not does not matter), since that would reduce your self employment tax and other tax liability. The LLC can be taxed like a corporation and you would make it manager managed so that you can have employees in there or you would use an S-corp, either way it would remain simpler to manage compared to the C-corp.

You of course will not break the bank, but will have to spend a little money using a local attorney to set this up, maybe less than $5000, but if you are doing as well as you say, the expense to get this set up and get trademarks in place and your tax structure set would end up saving you double that in the long run.