Two-and-a-half years ago, I decided to write a book. It took eight months to produce a first draft. This includes writing time and time studying how to write (because it’s been a hot minute since I took any kind of writing class).
I spent the remaining time learning how to author a book. You know… editing, revising, formatting, etc. And because I am a process person at heart, I wanted to learn the best approach to writing a book so I could repeat those steps for the next one.
I’ve discovered a few things along the way:
- The author community is surprisingly helpful. They want you to succeed and they are super happy when you do. They celebrate every milestone with you. People will cheer when you type “The End” on your manuscript.
- Pen names are extremely common. Nobody blinks if your Zoom name doesn’t match the name you give during introductions.
- Finding information on how to structure your business is difficult because laws vary from the country level to the state level and even down to the county/city level. Because the rules are so different, it’s hard to find any advice on this other than “talk to your accountant/lawyer.”
- Details on publishing are hard to find because the industry changes so quickly. Some of that is because of technology, and some of it is because of the market.
In this post, I want to address two very specific areas where I’ve had some frustrations: pseudonyms (pen names) and business structure.
Before I begin, I want to state emphatically that I am not an attorney, nor am I a certified public accountant. I am not giving advice, but simply relaying my experience and what I might have done differently with prior knowledge.
A pseudonym or pen name is a name that an author uses to publish their work in place of their legal name.
Reasons authors use pen names:
- Privacy. A pen name can create a separation of your professional world from your private life.
- Easier to remember. Sometimes an author’s legal name is hard to spell or pronounce, raising concerns over name recognition and other branding considerations.
- Genre. It seems like a weird thing, but if you look at different genres, the authors’ names often have a certain cadence to them. Two genres that stand out are Romance and Sci-Fi. It’s uncommon to see a male author’s name on a Romance novel, and female author names are the minority in Sci-Fi books.
- Already taken. Sometimes, an author’s legal name is the same as an established author in the same or similar genre.
There are also reasons NOT to use a pen name:
- Authenticity. Some authors feel awkward pretending to be someone else.
- Maintenance. Often, authors will have multiple pen names to match the different genres they write in. (This makes it easier for their followers to find the right books for them.) And multiple pen names means more maintenance on websites, social media, and other marketing platforms.
What I Did
I knew fairly early that I would use a pen name for my fiction. And, since the stories in my head cross genres, I may wind up with a few. (That’s still to be decided.)
My reasons for creating a pen name are for privacy purposes and because my legal name is… well, difficult. My first name is unusual and easily remembered. But my surname is a crazy Dutch name using all the forgotten letters of the alphabet. I figure people would either find me way too easily or not at all.
One frustration I’ve run into in using a pen name is knowing when to set up an account with my pen name and when to set it up with my legal name.
I’ve been using the rule of thumb that if it involves any kind of legal transactions (payments, contracts, etc.), I use my legal name and treat my pen name as a “user” on that account. Hopefully, this won’t bite me in the future.
In the United States, there are multiple business structures you can use. Please note, everything discussed here is based on U.S. laws. I know nothing about entity structures in other countries.
The most common I’ve seen used by authors in the U.S. are:
- Sole Proprietorship
- Limited Liability Company (LLC) – Single Member
- Limited Liability Company (LLC) – Multiple Members
Important! Banks and retailers treat single member LLCs differently from multiple member LLCs—a fact I did not know when I set everything up.
There are a lot of different rules around how these entities operate, but the primary consideration that most people look at is how they are taxed.
Note: When I talk about taxes, I mean federal taxes in the U.S. There is no state income tax where I live and I do not know how other states tax these entities. You need to do your research or—better yet—talk to a professional who understands your particular situation. IRS link: https://www.irs.gov/businesses
Here is a brief overview of the general differences.
- Sole Proprietorship:
- Description: This is when you set your business up under your personal legal name or with a DBA (doing business as).
- Federal Taxation: Sales and expenses are reported on your Schedule C on your Individual Tax Return (Form 1040).
- Single Member LLC:
- Description: A corporate structure that separates company liabilities from its owner.
- Federal Taxation: The IRS treats Single Member LLCs the same as a Sole Proprietorship. The single member owner reports the sales and expenses from the LLC on the Schedule C of their personal tax return (Form 1040).
- Multiple Member LLC:
- Description: This corporation structure has more than one owner and works more like a partnership.
- Federal Taxation: The IRS treats a Multiple Member LLC as a partnership by default and the LLC doesn’t pay taxes. Partnerships file a Form 1065 and report their earnings to each partner, who pays the taxes for their portion. However, they can elect to be taxed as a corporation. Corporations file a Form 1120 and pay their own taxes. (There are further rules and exceptions here, so do your research!)
- Description: A corporation that passes its income, losses, and deductions on to its shareholders.
- Federal Taxation: S Corporations do not pay taxes, but pass their earnings on to its shareholders. However, there are some extra rules around payroll and employment taxes you should know.
One other thing to know about LLCs is that the state manages them, and not the federal government. The IRS simply acknowledges them and collects their taxes accordingly. This means that the fees and procedures associated with setting up an LLC will vary by state. In some states, it costs nothing. In others, it could cost up to $800. So take that into consideration when deciding which way to go.
What I Did
My first priority for setting up a business was privacy. I wanted my business completely separate from my personal life. I was willing to pay the initial filing fee and spend the extra time each year on filing the Texas Franchise Tax return to get that privacy.
Based on my experience during my career as a finance professional, I was certain I wanted an LLC, but I confirmed with my CPA before setting it up, just to make sure I had considered everything.
Below are the steps I took. (Again, these are what *I* did and likely won’t fit your situation.)
- Filed with the State of Texas to set up the LLC (I used a service to do this and was happy with how easy it was.)
- Filed with the State of Texas to create the DBA for my press name (Likely not needed for you; I had special circumstances.)
- Filed with the IRS to get an EIN for my LLC with the DBA (so I wouldn’t have to use my personal social security number).
All right, I need to take a deep breath before sharing this part of my journey with you. It’s chocked full of frustrations.
Each of these filings took weeks (and sometimes months) to process. And they were all dependent upon the one prior. For example, I couldn’t file for the EIN until I had the DBA established.
So… the process was long and drawn out. And wait times were longer than normal because COVID has slowed everything down here in the U.S.
Remember my primary reason for going the LLC route was to maintain a separation of work from personal? Yeah, right. In setting this all up, I took great pains to have a separate office address and PO Box for my business, so that it wouldn’t be linked to my home address.
A list of occurrences that blew my privacy concerns out the window:
- When you file an LLC, you must list the names and addresses of each member. After filing, I started receiving junk mail addressed to my LLC at my home address.
- When I filed the DBA, the State of Texas addressed the confirmation letter to MY HUSBAND at my home address. Y’all, my husband isn’t listed ANYWHERE on my paperwork for this entity. Misogyny much?
- Upon receiving my EIN, I set up an online bank account. This well-known institution somehow linked my business checking account to my personal credit card. The business debit card showed up at my home address. And even though my personal address is nowhere to be found in the business account set up, I have to use the zip code from my home to validate the card when using it online.
My plan is to publish wide. This means I do not intend to publish through Amazon’s Kindle Unlimited program. I’m going to sell my books through all distributors and not be exclusive to any particular one.
While setting up my accounts at the big five retailers (Amazon, Apple, Barnes & Noble, Google Play, and Kobo) and Draft2Digital, I ran into another issue.
Each retailer’s requirements for business accounts were different. For example, several completely disregarded the LLC designation and wanted me to set up as a sole proprietor. One let me use my EIN, but another forced me to use my social security number. Still another didn’t even ask me for that information.
I have no idea what my taxes are going to look like this year because of these differences. (It may be no big deal. We shall see.)
So the big question is, would I do it differently?
I’m pretty happy with the pen name, even if it is extra work. Once I got used to having split personalities on social media, I settled in quite nicely.
As for my business structure choice? Honestly, it’s too soon to tell. I often think I should have stayed with the sole proprietorship, because “willing to pay for privacy” didn’t exactly work out for me.
Again, we shall see. I may have a future article that says “don’t do this” or it may say, “you’ll be fine.” I’m hoping for the latter.
I’d love to see some comments about your journey with self-publishing.
What business structure did you choose and why? Are you happy with it? Did you experience any stumbling blocks?
Let me know.
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