Writers Inc.

by Sue Hecht

When I first dreamt of becoming a rich and famous writer, it didn't occur to me that writing articles, books, copy, newsletters and press releases would evolve into a business for me. Successful writers and authors such as Mark Victor Hansen of Chicken Soup for the Soul fame who has redone his book marketing seminars and offered it in Atlanta, Ga last March. His seminar is called It's Not a Book, It's a Business.

An author who knows that they are a businessperson is the difference between a JK Rowling and hobbyists. Bernhard Dohrmann, the co-founder of Income Builders International, also advised me that successful authors market their books through a business. A shift in perception and I arrived at a new level of financial consciousness.

And creating a secure financial future is especially important during these uncertain economic times. Did you know that business ownership is the number one financial planning strategy of the wealthy according to Bonnie Simon, Corporate Credibility, LLC.

"If you are a writer making $50K+ yearly, incorporating your business can help you save taxes and protect your assets," she explains.

Benefits of Incorporation

For successful writers, the benefits of incorporation are numerous. By incorporating, you create a means of controlling how your income will be taxed and potentially save money on self-employment taxes. Plus, corporations typically do business with other corporations, adding to the marketability of your business.

In addition, as a sole proprietor, you are responsible for all of your business debts and liabilities, making you vulnerable to lawsuits that could wipe out your personal savings and assets. Not me, I won't get sued, you may think, but in this frivolous lawsuits and sue-happy society we live in now (Al Franken was sued by Fox news because of a few words on his book cover) fair use abuse and changes in intellectual property laws, my rule is never say never. (The National Writers Union, may be a good source of info on this topic, http://www.nwu.org).

The bottom line is corporations are deemed by law to have a separate legal existence apart from their owners. Hence, corporate owners are not personally liable for the corporation's debts or liabilities, and voila your personal savings and assets can be protected.

You can also borrow money from the corporation for a house or a car, and take advantage of tax-deductible, corporate-paid benefits (since you are considered an employee of the corporation) such as:

Pension plans
Stock option and stock bonus plans
Medical insurance coverage

So how do you incorporate your business, where should you incorporate, and which is the best entity for your Writers Inc? Here are some basic guidelines to get you started.

Choosing an Entity

Find a professional who will ask key questions such as: Is your writing business primarily service or product oriented? What is your gross revenue and net profit for a 12-month period of time? Do you have a partner? Will your business develop a net worth? What is your earned income level? This can save you Self-Employment (SE) tax.

"Don't form a Corporation yourself just to save money," Simon explains. "Look for a professional consultant via the internet, review their web site, and then give them a call. Compare their services and expertise to determine which company is best for you."

Steps To Incorporation

Ready to put on your corporate top hat and think like a CEO? Each state has a corporate filing office where you file paperwork (and pay fees) to create or dissolve a corporation. Most state corporate filing office websites provide corporate statutory forms such as Articles of Incorporation, Amendment of Articles, Change of Registered Agent or Registered Office Address.

Your corporation is born when its Articles of Incorporation are filed with the state. The filing of Articles is the only legal filing necessary to create a corporate entity. However, in order to make sure the legal organization of your corporation is complete, you MUST do the following to ensure the liability protection you were hoping for when you formed the corporation or LLC:

Avoid co-mingling corporate funds with personal expenditures
Properly capitalize your company
Complete corporate formalities, i.e., minutes and resolutions

Worst case scenario, if you don't adopt bylaws, appoint officers (most states allow one individual to hold all offices), hold annual shareholder meetings, and keep corporate records and end up in court, a judge could decide that your corporation is not a real legal entity. Then, the court could hold you personally liable for corporate debts. This is called "piercing the corporate veil."

You must also obtain a federal tax ID number and all corporations must have a registered agent on file with the Secretary of State. The address of the registered agent must be a physical address, not a post office box and the registered agent must be available during normal business hours.

Location, Location, Location

Sandy Botkin, Tax Attorney and Certified Public Accountant, author of "Lower Your Taxes -- Big Time"* says, "If you are going to incorporate, you should seriously consider doing so in Nevada."

The chief benefit to incorporating in Nevada is liability protection, according to Simon. "Nevada is still the hardest state in the country in which to pierce the corporate veil. In comparison, in 1 out of 2 cases, the corporate veil is pierced in California," explains Simon. "The corporate veil has only been pierced two times in Nevada in the last 24 years and both cases involved outright fraud."

Celia Sue Hecht (your PR Matchmaker) is a published author, writer/editor, and publicist, who has written hundreds of articles, and secured media coverage for professional clients such as authors, CEO's, CPA's, architects, doctors, seminar leaders and entrepreneurs in local and national print, TV and radio (LA Times, NY Times, Reno Gazette Journal, SF Chronicle, NPR, ABC, CBS, NBC, and other outlets). She is co-author of five romantic travel books, a radio talk show host, workshop and seminar leader, and a keynote speaker in venues around the world. http://www.vyze.com/suemagic. Contact: prmatchmaker@yahoo.com or 888-260-4673.