A Revocable Living Trust And A LLC For This Writer (Part 2)

Published: May 27, 2012 2012

This is the second part of a three-part blog post. Read Part 1 – A Revocable Living Trust.

A Limited Liability Company (LLC)

For the last six years, I have muddled through the business side of being a writer as a sole proprietorship (i.e., everything got shoved into a manila envelope until tax time). That was fine when I was selling first serial rights to print magazines and anthologies. After I started turning my reprints—and later, original manuscripts—into ebooks, I was not only a writer but also an ebook publisher. Now that I’m making more money from selling ebooks than first serial rights, it’s time to change the business structure into a limited liability company (LLC).

As a writer and ebook publisher, do I need to have a LLC for my business?

The short answer is no. If you don’t take out business loans or credit cards, don’t rent an outside office and/or invite people into your office, you don’t have any liability issues that you need to protect your personal assets from.

If you have significant income, you may want to consider forming a corporation to take advantage of the lower tax rates and benefit perks. A LLC that doesn’t elect to be taxed like a corporation is a pass-through entity for tax purposes (i.e., all income gets reported on Schedule C of your personal tax return). If tax planning is your primary concern for setting up a LLC or corporation, see a qualified tax advisor for more information.

The longer answer is yes. For my particular business situation, I’m setting up the LLC for several different reasons:

  • Having a LLC requires that you keep your business assets and your personal assets separate from each other. If you fail to maintain this separateness, a judge can declare your LLC invalid and put your personal assets at risk.
  • Unlike dealing with individual publishers for selling first serial rights, you’re dealing with the public at large when selling ebooks. Some idiot will always come along to shake you down for money. A properly structured LLC can prevent frivolous lawsuits from being filed in the first place.
  • Some of my future business plans may put me at risk for a lawsuit.

The major downside to incorporating a LLC in California is the $800 USD per year franchise tax that gets paid regardless if the business was profitable or not. Although I’m running an Internet business, and could form a LLC anywhere else in the United States for significantly less money, fighting off the Franchise Tax Board isn’t worth the trouble.

I’m forming my LLC without using an online service like Nolo’s Online LCC or consulting with an asset protection attorney. I’m comfortable with the process that I can do it myself. As I grow my business over the next few years, an attorney will need to review everything to make certain I’m doing this correct.

Next: Using A Living Trust & LLC Together (Part 3)

A Revocable Living Trust And A LLC For This Writer (Part 1)

Published: May 20, 2012 2012

This past month was somewhat difficult with my 77-year-old father’s illness and death from lung cancer. As I unwound his estate and disposed of his personal belongings, I started thinking about my mortality and how my copyrights would survive my passing. This prompted two major changes in my life: a living trust to organize my personal finances and converting my writing business into a limited liability company (LLC).

A Revocable Living Trust

As a single, unmarried and childless 42-year-old man with another 35 years to live, do I need to have a revocable living trust?

Not really. However, since I declared bankruptcy last year after being unemployed for two years and underemployed (working 20 hours per month) for six months, I’m rebuilding my finances from the ground up. Nothing focuses your mind on planning for the future than putting your assets into living trust.

I used Nolo’s Online Living Trust to create the initial documents for the living trust, designating my nephew as the successor trustee, and leaving my estate in equal shares to my nephew and niece. This arrangement may change in the future as I continue to live my life and grow my writing business. I can add amendments to reflect the changes or re-do the living trust as often as needed. If I become incapacitated, my successor trustee can follow the instructions in the living trust to unwind my estate to provide for my care. If I die, my estate can avoid going through the probate process.

My credit union notarized the living trust documents for free, and re-titled my checking and savings accounts into the name of the trust. Once the assets are in the trust, I no longer personally own those assets. As the grantor trustee, I still have full control over those assets. Although a revocable living trust provides no form of asset protection, and an opposing attorney can still go after the trust assets in a personal lawsuit, I need to keep this separateness in mind at all times.

Like a jigsaw puzzle, I’ll be adding additional financial accounts and assets to the living trust over the next few months to build a complete financial picture. I still need to create a “pour over” will to cover everything that isn’t in the trust yet. As my finances and writing business grows over the next few years, I’ll need the advice of an estate planning attorney to ensure I’m doing this right and taking advantage of any changes in the law.

Next: A Limited Liability Company (LLC) (Part 2)

Reprint Sells Better Than Original For Short Story eBooks

Published: May 13, 2012 2012

After selling short story ebooks for over a year-and-a-half, I can say that reprint content (i.e., published manuscripts) sells better than original content (i.e., unpublished manuscripts). This may surprise some writers. Although the ebook publishing revolution is the great equalizer for content, some content are more equal than other content (to paraphrase George Orwell’s “Animal Farm”). Knowing the difference can increase your ebook sales.

Depending on the content, I include one of the following two lines in the description and on the title page for the ebook.

For reprint content: “This 1,029-word short story was first published in The MacGuffin (Fall 2009).”

For original content: “This 1,155-word short story is being published for the first time.”

Readers looking for something new to read—especially from a writer they haven’t read before—would probably purchase the reprint ebook because an editor thought the original manuscript was good enough for their publication. (Assuming that the editor wasn’t an utter moron, which I have encountered a few during my snail mail submission days.) Readers can independently verify most publication credits on the Internet or at the local library, if the reader wants to go one step further before buying the ebook. Reprint content inspires trust, whereas original content requires a leap of faith, from the reader.

My goal as a short story writer is to publish my manuscripts elsewhere first. After the exclusive period is over (i.e., 90 days for web publication to 365 days for print publication), I can re-publish my short story as a reprint ebook. My goal as an ebook publisher is to fill the pipeline with reprint content as much as possible and use original content to fill out the publication calendar (two ebooks per month). Reprint content takes very little time to turn into an ebook. If I can get enough reprint content into the pipeline, I’ll have enough free time to write and publish an original novel ebook.

The 500-Word Blog Post

Published: May 6, 2012 2012

When I decided to get back into blogging on a regular basis for my personal blog and this writing blog, I also decided to limit myself to 500 words or less per each blog posting. Having written numerous 500-word flash stories, this was a comfortable length that represented 15 minutes to two hours of work. Like any good flash story, you need a solid beginning, middle and ending to make a blog post work at that length.

When I surveyed the 300 postings from the two blogs to start compiling them into ebooks (starting with ASVW Volume 1), the shortest blog post was 29 words (i.e., an introduction to a video) and the longest blog post was 3,000+ words (i.e., a book review with a half-dozen books).  The average length between the two extremes was about 500 words. I have enough material to release ten 15,000-word ebooks over the next year. If I continue to blog at a regular pace, I’ll have enough material to publish two blog compilation ebooks each year.

Writing a 500-word blog post isn’t a piece of cake. If I can’t shoehorn an idea into 500 words in less than two hours, I need to split it into multiple blog posts or turn it into a 3,000-word essay ebook. That’s what I did for the Kickstarter blog posts (Part 1/Part 2). A bit ugly but a practical workaround to stay within the 500-word limit I set. Quoted text from other sources doesn’t count towards the limit.

If everything goes smoothly (and nothing ever does in my life), I can knock out a week worth of blog posts—2,000 words—on a weekend afternoon.