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"I Need Coffee" is a monthly column on Huffington Post Books. INC covers all sorts of writing topics, with an eye toward how to make a living writing. INC's audience includes both authors and aspiring authors, and authors who are both mainstream and independent.
Note: A version of this column first appeared in Underground Book Reviews, an online magazine run by indie authors who are passionate about writing. They publish articles about the world of independent literature, reviews of independent literature, and more.
When I first started writing for money, I also held a regular full-time job. I wanted to keep my income streams separate to help with things like mileage, taxes, and purchasing, so I created a separate business entity for my freelance income.
The first thing I did was form an LLC (a "limited-liability company"). I got my federal tax ID number, and then I created a business checking account. I started filling out my W-9 forms (whenever clients requested them) as that business entity and had all my checks sent to me via my LLC. I might not have been making a lot of money, but I felt professional.
That was nearly five years ago. As I've published more books and paying articles, earning more money from writing, and as I've started making money as a writing consultant, things have changed. First, I quit my day job. Second, I got even more real with my writing business. Here's what I've done to run my writing business like a business, one that can sustain itself.
(1) I'm now incorporated: "Pryal Consulting, Inc."
Pryal Consulting is an S-Corp, in case you were wondering, which basically means that my taxes are way easier than a C-Corp and I have to worry less about stock and other corporate-y things. (Caveat: None of what I'm writing here should be construed as legal advice.) Having a corporation collect my book royalties and my freelance and consulting income allows me to do a lot of things, including,
(2) Having my own 401(k).
The Pryal Consulting, Inc., solo 401(k) is my family's retirement plan. Banks would LOVE to help you set one up for free, and many will do it for free. But you can only have a corporate-style retirement plan if you have a corporate-style business. There are many benefits to having a 401(k) of your very own. You can set aside a much larger portion of your income than you can set aside into an IRA or even a 401(k) through an employer that is not your business. You also have greater control over your retirement plan.
But the retirement plan isn't the only account that Pryal Consulting owns.
(3) I have a business checking account.
Because I have a business, I have a business checking account, and I use that account to pay for my business expenses, which actually makes tax time easier. I don't have to mark expenses as business or not, because if I used my PC, Inc., account to pay for expenses, then I know they're business expenses. And as a freelance writer, I actually have a ton of little expenses that I'm glad I have a separate business card to pay for.
But to manage all of these accounts,
(4) I own bookkeeping software, and I'm super good at using it.
There are a lot of bookkeeping alternatives out there -- Quickbooks is the big name -- and I recommend you try software until you find one you like. The secret? Double-entry bookkeeping. You don't just want a computer program that will balance your checking account. You want to keep your books. There's a difference. Basically, if you're spending money, you want to know where that money came from. (And so does the IRS.) You can also use the software to track your mileage, your retirement account (see #2, above), create invoices, and more. You know--run your writing business.
Lastly, but perhaps most importantly, since I'm an author,
(5) Pryal Consulting, Inc., has a book retailer account through Ingram.
Sure, there are other ways that authors can buy books at a discount, but as many of you might know, often those purchases don't count toward our author sales. If I consign books, or sell them at festivals, none of those sales would count toward my author sales. That's super frustrating.
I want the books I buy, and the books I sell, and even the books I give as gifts, to count toward my author sales. That's why I applied for a retailer account at Ingram. The process was long, and I'll let you know the details of the process in next month's column. But it was so worth it.
I was at a book festival just last week, and I sold fifty books. All fifty are books that I purchased through Ingram just like any other bookseller would have, and all fifty count toward my overall sales numbers.
The point of #5 is this: When you run your writing like a business, you can think of possible solutions to author problems -- How do I get a hold of books that count toward my sales numbers?--that might not come to you if you limit yourself to just the role of author.
It's not enough to just be an author any more. My publisher is great, and I have many friends who have great publishers too. But we all agree on one thing: we have to do more than just write books (or articles, or whatever it is we write). We have to be smart businesspeople, too.