Does a self-published author need to incorporate?

When self-publishing a book, you essentially are starting a business. So should you incorporate?

Most authors will say the general answer is “no.”

After all, incorporation (such as becoming a “limited liability corporation” or LLC) provides little benefit to the author. The main reason that businesses incorporate is to protect the owner’s personal assets (such as his home, car, investments) in case the company should be sued. When authors land in court for their work, it typically is for defamation, infringement or invasion of privacy – claims that are based on your individual conduct. Hence, being a corporation provides no shield for you.

In addition, many authors find the cost of incorporation generally is far greater than revenues from a self-published book’s sales. You will need to earn several hundred dollars annually from sales or you’ll actually be spending more money on government licenses and fees than you earn from the business. There’s little economic sense in incorporating when you can run a business without doing so.

Indeed, rather than incorporating, most authors opt to be a sole proprietorship. No legal documents usually are required to say that you are in business, so long as the name of your business (if you name it at all) matches or includes your actual name.

Of course, some authors do find a benefit to incorporating. For example, if you have a series of books and annually earn thousands of dollars from their sales, incorporation might be able to save you some tax dollars. In addition, if you have formed a publishing company that does more than serve as a fictitious name for your published works – for example, it publishes other people’s books as well as your own and has employees – incorporating is a good idea.

A final note: This post merely reports the current norm in the self-publishing industry and does not constitute advice. Especially if your situation is unique, always consult an attorney and tax consultant before making a final decision.