Ken Coffman is a novelist and owner of a small publishing company called The Armchair Adventurer. Coffman writes:
I did it. You can do it too. I am no business expert. I do not know the optimum way of doing things. I don’t care. I used this on-the-cheap method to create my company. If there are better methods, then use the comment field to inform the world. In advance, I thank you for your service to mankind.
1. First of all, dream up a unique name. Google it and make sure it is not being used by someone else. Surf over to godaddy.com and make sure the domain is available.
2. Now surf over to the Company Corporation (www.incorporate.com) and create a LLC (Limited Liability Corporation). Register your company in Delaware or Nevada. I picked Delaware like most other corporations. Why? Because I said so, that’s why. It’s $99 for the economy method and another $120 for the filing fee. Save up your money, you can afford it.
3. Register your domain name(s) with godaddy.com. Pay for five years so you don’t have to hassle with the yearly payments to keep it active. If you don’t have a host for your domain, you can use the service(s) godaddy provides, but that’s not how I do it. There are a billion server services in the world. Use your favorite.
4. Now you have to register your foreign corporation with your state. This may be done online, maybe. Trust me, any interaction with the government will be frustrating. Don’t sweat the small stuff, just roll with it. There are traps, so avoid them. You are not going to sell anything directly, this avoids the sales tax trap. All of your sales will be done either out of state or via a supplier that pays the sales tax, like Amazon, brick and mortar book stores and the like. You’re providing a publishing service. You are not hiring any employees.
5. Now that you have an LLC and a state business number, you can open a bank account for the business. Like government agencies, banks are a pain in the ass too. Fair warning.
6. Register and reserve a block of ISBNs at http://www.isbn.org. Don’t bother creating a bar code at this time, this will be done when designing the cover after you’ve picked a sales price.
7. Like almost everyone else, you’ll use Lightning Source as your printer and listing services. Surf over to lightningsource.com and register your company. If you know how many pages your novel is, then you can get a printing cost. Then you can decide how much markup to allow the reseller (I give them 55% to encourage them to carry my book). Then you can pick a resale price.
8. Find a graphic vendor or partner. I’m a writer, not a graphic artist. I provide photographs and sketches to my designer friend who creates the cover. His software can create the bar code (which includes the ISBN and the resale price).
9. Now you have a PDF for the cover, the front matter and the novel text. Upload that to Lightning Source. Magically, if you want, a review copy will appear. If you like the look of it, approve it and you’re in business. Lightning Source will take care of listing your book with Amazon and Ingram.
10. Now comes the hard part. Your books will not sell themselves. You have to get out in the world and sell them yourself.
11. Let me say a few words about taxes. I think everyone should have a small business and look at all spending as either tax-deductible or not. All business expenses are deductible. Since you’re always doing research, what about your trip to Venice? Deductible. Business use of your car? Deductible. Your home office and computer and camera and DSL and phone bill and business-related books and software? Deductible. You probably think that you need to make a profit in 3 of 5 years, otherwise the IRS will classify your business as a hobby and decline your deductions. Pardon my language, but that’s bullshit. The 3 of 5 years is a guideline, not a rule. You can lose money every year for the rest of your life, it’s still a business. There are requirements. You have to operate in a business-like manner with the intent to turn a profit. In other words, you should have business cards. You should do marketing. You should claim some revenue. You should be prepared to make your case to an auditor with a clear conscience. You should think about and understand the difference between tax avoidance (which is legal) and tax evasion (which is illegal).
12. For tax matters, I highly recommend a book called Tax and Financial Guide for Engineers and Architect from Academic Information Service, Inc. http://www.taxguide-engineersandarchitects.com This book has examples and talks about tax court cases which clearly define what you can and can’t get away with (did I say that out loud?). Yes, this book highly recommended.
13. I didn’t think of everything. There might be better (or cheaper) ways to do things. Let’s hear about it.
December 31, 2008 at 1:07 pm
Ken, I don’t want to do all that on my own. Kudos to you for taking it on. Your instructions seem clear enough.
You’re correct. Books don’t sell themselves. That takes a lot of work on your part as the author. Having your books listed on Ingrams helps when approaching booksellers–most of which do order off Ingrams–to carry your books in brick and mortar bookstores.
December 31, 2008 at 1:25 pm
Wouldn’t it be even cheaper and easier to register as a D/B/A? I’m sure you have a reason why you didn’t do that.
I appreciate the step-by-step tips. I may try it myself. Thanks.
December 31, 2008 at 4:06 pm
Ken, #10 is where Book Marketing Floozy comes in — all the information I find about how to promote is and will be posted here. Give authors a free one-stop shop for ideas.
January 1, 2009 at 3:54 pm
As I understand it, DBA is a subsidiary of an umbrella company, so it does not help you avoid the hassle of creating that higher company entity. You could operate as a sole proprietorship, but this does not shelter your personal assets if there is a problem. I have several businesses and they’re all inter-related. If all I was doing was publishing, then maybe a sole proprietorship would be fine. The real reason I formed an LLC is because Microsoft made me. Though I don’t sell anything to MSFT anymore, I’ve kept the company and it has evolved.
March 10, 2009 at 12:07 pm
DBA does not have to be a subsidary of an umbrella company. Often a DBA is filed by an individual who does not want to operate under her own name. Instead of operating as Jane Brown Publishing, you can create a more business sounding name like Happy Books, or East Bay Publishing . Etc. Then as you build your business, no one can set up with your DBA name in the same area. You would be operating as a sole proprietor.
March 24, 2009 at 5:30 pm
Thanks for the clarification, Robert.
April 9, 2009 at 2:28 pm
A very useful overview, Ken. I used the Academic Information Service’s books each year for a long while(starting in the ’70s IIRC.) But I can’t find them now —
gets a “cannot display the webpage” error, and I can’t ping the host either. Are they lost and gone forever? A shame if so — far better information than through TurboTax or the IRS!
May 2, 2009 at 9:42 am
Laughing my behind off at the tax comment. I’m cheap and this is great advice. Thanks for posting.
November 24, 2009 at 2:21 pm
Thanks, Ken! Your work was fantastic and easy as 1-2-3 to follow.
November 24, 2009 at 10:59 pm
4. “Now you have to register your foreign corporation with your state.”
I don’t see in the example given a foreign corporation was created. Could you explain the foreign corporation philosophy? Also, I thought you used Delaware? Why not register the LLC under the state you reside in? Is it legal to register the LLC in a different state that what you reside in?Thanks for responding.
November 26, 2009 at 12:18 pm
Jim, here’s Ken’s response:
Hi Jim, great questions. Things might have changed since I formed my LLC in 1999, but Washington State is a very business-unfriendly state, so it’s cheaper and easier to form your LLC in a state that caters to out-of-state entities…these states include Nevada and Delaware. Yes, it’s completely legal to create your company in a business-friendly state and then register with your local state as a foreign corporation. Plus, the yearly fees and paperwork to keep your LLC alive are less onerous. Registering is easy with online registration companies like the Company Corporation (incorporate.com). If you told me it’s cool to start your company in Texas or Wyoming, I would believe you, but if you live in a state like New Jersey, New York or California? Not so much. Most big companies (like Boeing, as a local example) are registered in Delaware.
If you haven’t noticed, there is a libertarian thread to my thinking, and I believe the state has less power to “mess” with your business if it’s registered as a foreign entity. –Ken Coffman
September 20, 2011 at 8:52 am
Great advice, Ken! I’ll give it a shot and report back on my progress.