Taxes & Finances for Authors

Publishing a book—and the opportunity to sell that book and earn royalties and profit—is exciting! But many authors don’t realize that publishing a book is just like launching a business, and there are many financial aspects they need to consider. Ignoring or not handling the finances properly can get an author in financial hot water down the road.

Questions like: Should the book be published under a personal name or a company name? Should the author create a company that then owns the rights to the book and is responsible for the income? What kind of company will it be (i.e., an LLC)? Should there be separate bank accounts? Who will pay taxes and how? We always recommend that an author consult with a CPA and legal consultant when publishing a book to make sure they’re not only protecting themselves, but that they’re also following the laws related to publishing and selling their book.

Once an author has determined whether they are publishing the book under their personal name or a company name, they may then need to register their new company. A legal and/or financial consultant can help an author determine if they should create an LLC, S Corp, or C Corp.

Next comes budgeting correctly for the costs of publishing. Where will the income come from—a personal budget or a sponsor or financial backer? Are you tracking the expenses of publishing, and, if so, what of those can you write off? And don’t forget about budgeting for long-term expenses such as marketing, distribution, and additional book printing.

A big thing that many authors don’t think about is taxes! Authors not only have to declare the royalties they have earned in their taxes, but they also have to collect and report sales taxes for the books they sell on their own, whether in person at an event, on their website, etc. Each state’s sales tax laws will be different. In some states, you will have to report your sales taxes on a monthly basis. Other states may vary. That’s an extra responsibility that some authors are not prepared for when they launch their book. Be sure to speak to your CPA or a tax consultant about what you’re required to report and what taxes you will have to pay. You don’t want to mishandle your taxes and jeopardize all your efforts by facing fines or worse.