Interview WIth Mike Piper

1) You publish books about small business structure; how is your own company structured?

For the moment, my publishing business is a sole proprietorship. I generally think that publishing is one of the businesses with a fairly low exposure to lawsuits. Of course, I try to be pretty careful by including a legal disclaimer on everything I write (including one on my site). I do this for two reasons. First and most obviously: I want to protect myself. Second: I really *do* think it's a good idea for business owners (publishers included) to discuss the more complicated tax decisions with a professional. I'm of the opinion that many business owners are scared into forming an LLC (or incorporating). I'm certainly not saying that forming an LLC is a bad idea, per se. I just think that it's important to evaluate the source of anything you read. For instance, if you find yourself on the website of a company that provides LLC creation and incorporation services, don't you think that it's at least possible that the information they provide is slightly biased?

A second reason that my publishing business is a sole proprietorship is that, at this point, the revenue from my publishing business isn't high enough that I would save any money by forming an S-Corp or a C-Corp. (My first book is generating approximately $800 in monthly revenue at the moment, which, while perhaps decent for a first foray into the publishing realm, doesn't exactly equate to a huge sum of money.)

2) How can a corporate structure help a small publisher lower their tax burden?

There are two possible ways that a publisher might save on taxes via incorporating. A publisher might save on taxes by forming an S-Corp as a result of the fact that profits from an S-Corp are not subject to Self-Employment Tax. However, before any profits can be distributed, the publisher would be required to pay any owner/employees a "reasonable salary." This salary would be subject to social security and Medicare taxes (which would end up totaling the same amount as the SE Tax). In short, S-Corps can help business owners save on SE Tax, but not until they're making some pretty serious money.

It's possible for a business owner to save on taxes by forming a C-Corp and using a strategy known as "income splitting." This strategy is only helpful once the business owner is earning enough money that she doesn't plan to use all of the business's profits to help pay for her own personal expenses. The essence of income splitting is to annually pay out a portion of the profits to the owner of the business in the form of salary, and leave the remaining portion in the corporation's bank account. This results in the taxable income being split between the corporation and the individual, thus leaving them each in a lower tax bracket than either would be in if they were taxed on all of the income.

3) Were you led to your publishing topic by market research or did you write your first book in the dark?

I did do a small degree of research before actually beginning the writing process. I wanted to make sure that there was sufficient potential for sales to justify the effort. My research consisted of tracking sales ranks for competing books over a period of about 7-8 weeks, then using the information on your site [For reference, this is how I originally found your blog and book.] to estimate their sales. After looking at each of the websites of the competing publishers/authors, I didn't see any reason why I couldn't do at least as well, provided that I had a way to differentiate my book.

4) What have you learned about online marketing since you started?*

Oh my goodness, where to start. I realized right away that I'd need to learn as much as I could about search engines, and in the process I've become absolutely fascinated by them. At this point, I regularly read two blogs about search marketing: seobook.com and seomoz.org. Once a book is selling steadily on Amazon, Amazon's recommendation systems will keep it going nicely. But you need something to get that first group of people to your book's Amazon page. For me, search engine traffic to my website plays that role. (Thanks for the business model by the way. :-)

5) You've started out as a short discount publisher. Do you envision changing your approach and targeting bookstore shelves at some point in the future?

At this point, I really don't. The entire point of my books is to cover a given topic in as concise a manner as possible. As such, they're rather thin. They look nice from the front, so they can do well on Amazon. But I suspect that—unless they had front-facing placement—they wouldn't be as successful in a bookstore setting.

Mike Piper
www.SimpleSubjects.com/tax