Adsense

What's A Publisher Need To Be Legal?

Life is complicated, business is simple.

OK, that's the short answer to a question I've heard three times in the past week, one by phone and two by e-mail, which I think means the British are marching on Concord.

The question is in the title of this post: What's a publisher need to be legal? Sometimes, the question is phrased a little more specifically, as in, "Do I need to incorporate to start a publishing company?"

Incorporation is complicated, unless you've done it before, and it costs money. It doesn't have anything to do with the legitimacy of a publishing business, it won't help you sell books or get reviews. Incorporation can be an important step for some businesses, but its implications are financial and legal. Corporations follow a different tax regime than individuals, have different reporting requirements, pay annual fees, and are taxed at a different rate. Businesses tend to incorporate to make it easier to raise money from multiple investors and to protect those investors from illegal or harmful actions the corporation might take.

If you're a self publisher or a new small press, you probably aren't trying to raise money through selling shares, and you probably don't have a lot of spare cash to spend on setting up a corporation. I do know a few self publishers who are incorporated, but most of them were incorporated before they added publishing as an activity. Incorporation can protect shareholders from legal actions, limiting their liability to the amounts invested, but incorporation doesn't give individuals protection from their own actions. In other words, if you're a self publisher, incorporating doesn't protect you from charges of libel (and legal awards) if you commit libel. Incorporation may protect investors in your self publishing company if you did everything right, but as the author of the libel, you're responsible as an individual.

I've never lived anywhere where a publisher was required to obtain any sort of special publishing license, but self employed people who use a made-up name for their business often have a local business licensing requirement. Around my neck of the woods, it costs $30 or so to file a DBA (Doing Business As) at the local town hall. I believe the purpose of the DBA is to prevent you from hiding from legitimate complaints. If you want to use your last name in the name of your publishing company , it's usually not necessary to inform anybody you've started a publishing business until...

TAX TIME

The people who really, really care about how you're doing are the IRS and your state tax authority. If you make a profit, they want their money, or our money, depending how you look at it. In your first year, you aren't required to pay estimated taxes, but come tax time, you have to file a Schedule C for the business, and give them the name of your publishing company. The name of the company has no impact on the taxes you owe, it's just a label.

5 comments:

Graveside Tales said...

Hi Morris,

I have spoke to you before about dealing direct with a printer vs. who I thought was a printer that being Outskirts Press.

I find it very interesting that you would do a blog entry on this subject. My partners and I have been discussing forming an LLC, one for the benefits and also the raising of capital. We have decided to not form an LLC based solely on our current project but instead it will now become an imprint. We really want to make a go in the POD market and become the premier publisher of horror and possibly some other areas as well. It is our believe that POD is at the forefront of something very big that is happening as the big time publishers are using POD more and more.

I read online that even Simon & Schuster is now contracting authors so that their books never truly go out of print because they will be produced using POD services.

Any advice you can give would be greatly appreciated.

~Dale
Graveside Tales

Morris Rosenthal said...

Dale,

An imprint might not be the perfect term either, normally "imprint" is used when an existing publishing company decides to start a new line of books, or purchases another publisher.

I posted something a week or two ago about all the big publishers using POD, pretty much everybody I checked.

As a science fiction publisher, you may run some libel risk if you publish something from an over-the-top author writing about alternate reality that cuts too close to the truth, and there's always the risk of an author having lifted a story from somewhere, but that's something to discuss with your lawyer if you're worried.

Since you're doing a partnership, you might want an LLC for personal reasons, to limit your liability for bad business decisions made by partners if possible. In other words, if a partner goes to a show with the company credit American Express and spends a million dollars, hopefully you'll be protected against the debt beyond the assets you committed to the corporation. But again, that's a question for a lawyer or CPA.

My personal take is that incorporation of some form or another is probably a good idea for you, in part because you aren't self publishing. When you start signing a lot of contracts with authors, you don't want to make it easy from them to hold you personally responsible for their disappointments, whether real or imagined.

So overall, I'd suggest sitting down with your partners and talking to a lawyer to make sure you're all on the same page about risks.

The rest, as they say, is marketing:-)

Morris

Graveside Tales said...

Thanks Morris, great advice always. You are right on the liability reasons for forming an LLC. You are also correct on the imprint. We will be forming XYZ publishing and use our current project for our first line of books. As we grow and expand say into say YA books we will probably release that line under a different name. It's definitely one step at a time.

To be honest the amount of response we have gotten so far has exceeded our expectations a 1000%. Our first book is going to be released Aug/Sept. Another in the Winter 2007/2008 with our first novel around March 2008.

I do want to say this to anyone who reads your blog do yourself a favor and go out and get yourself a copy of Morris' book PRINT-ON-DEMAND Book Publishing.


~Dale
Graveside Tales

Morris Rosenthal said...

Dale,

Exceeding anything by 1000% is pretty impressive. I stopped by your website, it looks to me like you've done a complete redesign since I first looked a few months ago - either that or one of the two times I went to the wrong site!

Morris

Graveside Tales said...

Morris,

We did a complete site redesign because the software theme/template we were using wouldn't lay stuff out properly. Now it does and it looks much better.

~Dale