Good points, Kev. I didn’t explain the employee part. It’s too complicated, and not always a benefit. As are most things with corporations. Complicated and not always beneficial.

Same thing with writers who have published a few stories or novels. “Should I incorporate yet?” Answer: you shouldn’t be worrying about that yet.

As you described, Kris, corporations have some advantages (I am incorporated as WordFire, Inc. and have been for about 15 years); we are able to write off many expenses and activities that we wouldn’t be able to do as sole proprietors. However, my wife Rebecca Moesta — who is also an award-winning and bestselling author — spends the bulk of her time doing all the paperwork and business of running the corporation, rather than writing new work. You have to give yourself a reality check, and don’t underestimate the time that needs to be spent in managing a corporation. Do the advantages outweigh the lost time and income?

Biggest (intangible) advantage you didn’t mention, Kris, is the fact that if you’re incorporated you are an *employee* of a corporation rather than a “freelance writer.” Even after I had a dozen bestsellers and a bunch of books under contract, the banks remained skeptical about giving me a mortgage or a car loan because my occupation was “freelance writer.” One bank even wanted me to get a letter from my publisher guaranteeing that they would buy my novels for the next ten years. (Fat chance!) However, when I applied for a mortgage as “President of WordFire, Inc.” and could show that I drew a regular monthly paycheck (drawn from my own account), then suddenly I was OK.

KJA

“I want to add five cautions to your comments on the Frankstein problem
(making a corporate person for authors)… in terms of additional
circumstances that the competent counsel someone in the arts consults need
to know before advising you on a business structure. This is IN ADDITION TO
all of the usual questions.

(1) Is there existing intellectual property — copyrights, trademarks,
performance rights, patents, trade secrets — that needs to be folded into
the new business structure? Do NOT underestimate this step; in fact, it can
be the go/no go factor all by itself, especially if any of that IP is rights
inherited or otherwise acquired, instead of created directly solely by the
prospective Victor.

(2) What are the Creator’s age and health circumstances? If Victor is on the
far side of fifty and/or have health circumstances that might prevent him
from forseeably and personally operating your business structure for at
least a quarter of a century, doing his creative work as work-for-hire for
the Creature might result in a _longer_ copyright term… but it might also
create problems with termination rights. Corporations have some advantages
(you’ll not see them in the statutes; they arise in practice) for trademark
rights denied to individuals, such as the ability to trademark the authorial
name as a business asset, and have an easier time dealing with trade secrets
than do partnerships and LLCs.

(3) Does Victor have any active options on any IP interests, either direction?

(4) Is Victor’s will current? Actually, this is a trick question: If the
lawyer doesn’t ask about this some time during the initial interview — or
already know — when seeking to transform a sole proprietorship, Victor
needs a different lawyer. NO EXCEPTIONS HERE: If you own any IP interests,
even in unpublished fiction, you MUST have a current will or your IP
interests WILL result in headaches down the road for your heirs… whoever
they may be.

(5) Will any IP rights be shared with other individuals, whether or not
they’re going to be parts of the corporate structure? And, if so, will that
forseeably be across state or national boundaries?

The reason that I mention these is that I have seen each and every one of
these five situations turn around to bite an artist/musician/author in {pick
favorite delicate anatomical region} because they were NOT considered during
business structure formation… and could have been handled correctly if
they had been. The five particular circumstances that led me to formulate
those questions (a decade ago) had a total eventual and avoidable _legal
bill_ of nearly half a million dollars and damages/value in the low seven
figures — and none of them concerns a Big Name Author (in fact, one of them
concerns an author you’ve never heard of due in part to the mess that scared
off publishers).

And, of course, this is not legal advice for any particular situation, any
particular person, or any particular jurisdiction.

=====================
C.E. Petit
http://www.scrivenerserror.com http://scrivenerserror.blogspot.com
This message may contain legal commentary. Unless specifically noted
otherwise, such commentary is NOT intended as legal advice for any
particular situation.”

Or the reverse, Dave. Companies refuse to believe you have anything to do with the corporation because your name isn’t part of the logo. You have to send paperwork, signed by you, authorizing you to do business with the company.

Taxes and laws regarding corporations, particularly financial service corporations & credit card companies, are particularly lenient in Delaware, Randy. Technically, your corporation needs to have its home in the state in which it incorporates. So if you incorporate in Delaware, your headquarters need to be in Delaware. Some states make it particularly easy to have a “home” in their state. Others have more red tape than you can think of. Watch your state’s laws. We dissolved our corporations when the State of Oregon changed its tax laws to tax gross income instead of net income. Talk about unfriendly. Think about it. If your business takes in one million in gross, and spends $999,000, Oregon will tax the one million, instead of the one thousand dollars net profit. (And probably will make your business lose significant amounts of money that year.) Oregon went from some of the best corporate laws in the U.S. to one of the worst.

Why do so many companies incorporate in Delaware? Can you incorporate in any state, and, if so, what are the advantages?

There are places online that will help you incorporate or form an LLC, but like with most DIY services they leave it up to you to know what you need or want. Even if you want to save a few bucks by going that route, you still need the advice of experts to know what to get. It’s easier to get it right the first time than to have to change it later. You think running a corporation is a lot of paperwork? Try dissolving one.

There’s another minor advantage to forming a business entity that you didn’t mention – some vendors will deal only with businesses, not individuals. A few years ago I needed an electrical part for a project I was working on. It was available locally from an industrial supplier but they wouldn’t accept an order for it because I wasn’t a business. I had to order it online and wait a week for it to be delivered.