Dangers of Being a Sole Proprietor

I dedicate this blogpost to those who are authors with a publishing company, but are operating as a sole proprietor.

Now how many of you like a simple life? I'll be honest, I do too. But this is one area that you can not neglect. Let's talk about what a sole proprietor is:

This is where you own a business and you can start it right where you are. You don't have to file any article with your respective state. The only thing you have to file is a DBA (doing business as) with the state. The cost should be less than $50 depending the state. On your taxes, you can just file just file a Schedule C and call it a day. Sounds simple, right? It is.

Now, let's talk about the dangers. 

If you are sued in your business, you have no protection of your business. Whoever is suing you can come after your business assets AND your personal assets. If the business is bankrupt, so are YOU. 

People with a business as a sole proprietor will more & likely stand a greater risk of being audited by the IRS. If you don't have any income for 5 years or if you have losses, it will be treated as a hobby and not a business. If you set up your business as an LLC (a hybrid version of a sole proprietor, where creditors can not come after your personal assets) that's a way around that trap.

Just a little food for thought.

The Mayne Man

Why Do Authors Need A Bookkeeper?

As an author, I've been able to talk to many authors and consult them on various things. Because many authors have publishing companies, it's imperative that they have a bookkeeper.

I'm sure a lot of you are looking at me strange when I say that. But let's face it, authors write and count money. But if you're good at managing your books and having good records when it's time for taxes, or if you are good at doing your taxes, then you are exempt from this article. 

I write this article for those who are not good at managing your books or you just want to minimize your taxes legally (and lessen the risk of an IRS audit). If this is you, then hiring a bookkeeper is not a bad idea. 

What are some reasons to take on a bookkeeper:

1. Starting a publishing company - unless you have a substantial amount of working capital (money) to where you don't need to apply for a small business loan, then you will need a bookkeeper. He or she will handle your books for a reasonable fee and present you a financial picture via charts, graphs, etc. so when you go to apply for a loan, you will have something to present. 

2. You have been hit with back taxes - a bookkeeper will help you manage your personal and business records so when the IRS wants to see your records, you're empowered to face them and not run from them. 

3. Tax season - the last thing you want to do is to wait till the last minute to go to your bookkeeper with your receipts when it's time to file. You want to be proactive with your taxes and reactive. 

4. Your personal life can get back in order - sometimes your life will come to light when you see the numbers in front of you. 

Hope this helps. It's one thing to make money, it's another thing to keep it!

Stay tuned, and I have one more article next week (right before that April 15th deadline).

The Mayne Man

Authors & Taxes

I was privileged and honored to be featured on fellow author Tyora Moody's Written Voices Blog back in November of 2014. This was the article that I wrote for her column. I felt it was appropriate to post it on my blog now considering that April 15th is right around the corner. Hope this is beneficial.

Authors and Taxes

Many people don't know this about me, but my profession is accounting. At my day job, I conduct audits but I am preparing to start up a tax practice in 2015/2016. As an author and an auditor, I know that we are all prone to being audited by the Internal Revenue Service (IRS).

However, being a small business owner can make you more susceptible being audited. It is true that there are loopholes for authors and other small business owners, but from what I see and hear in my field there are a lot of people either taking deductions that they shouldn’t, evading taxes all together, or dodging owed back taxes.

Mistake # 1: Home Office Space Deduction

Just because you have a desk and a laptop at home does not mean that you automatically qualify for this deduction. You must meet certain criteria for the home office to be recognized and no, never claim your monthly rent for the apartment you live in as the deduction. You must be able to prove that the amount you claim is what you use reasonably in relation to the space. If you live in a home that you own, try separating the utilities—an account for the main house and another for your office space. This way, there are no questions about who uses what. The IRS is big on documentation. Be prepared.

As I writer, I don’t take the home office deduction because I spend most of my time writing/working away from home. Too bad I can't take a deduction for the coffee I drink in coffee shops.

Mistake #2: Meals and Entertainment

The only way you can legitimately take this deduction is if you're having a meal with a client while discussing business or you are traveling overnight away from your residence. Just like travel expenses, the meal cost must be reasonable. 

Mistake #3:  How You File

If you own a publishing company where you are taking on other authors, you should NOT be a sole-proprietor. Be sure to convert to an LLC or an S-Corporation. Speak to a tax and/or legal professional to help. This protects your liability and you show the IRS that you legitimately have a business and not a hobby. 

What You Can Deduct

One huge gripe of mine is someone telling me what I can’t do without providing solutions to what I can do. So below are a few things you can do to make your tax burden a little more bearable.

1.     Office Supplies – Consider printing, book mailings, postage, envelops.

2.     Travel – If you travel more than 30 miles outside of your city it is deductable. Be sure to use mileage (document in a notebook) versus gas costs. You can find current mileage rates on the IRS website.

3.     Advertising and Public Relations Costs—if you pay a publicists or buy ads you can claim these costs.

4.     Computer and Internet Services-you can use this as a deductable if you are using it solely for business.

There are plenty of deductions that you can take when you own a business. If you have questions, feel free to contact me at Tremayne_Moore@yahoo.com.