The Start-Up Writer

Who doesn't dream of working in pajamas, coffee cup in hand, laptop nearby, in total control of the day's schedule? I'm in. If you're a writer, then you're one of the lucky folks who can work from anywhere, as long as there's an Internet connection and a computer. Even if you're still at a day job, the writing gig is often a good source of extra income, which has been my experience for several years. Writers are more interested in plots, research, and all manner of editing, but are often puzzled about the business side of writing. 

Here are the nuts and bolts of setting up your writing business without a nasty surprise at tax time. This first post covers getting your business set up correctly. 

Am I Really a Business?
Whether you've written a book, freelance for magazines or websites, if you receive pay for it, you've attained the rank of professional writer. That means you have a business. The assumption of this article is that you are a sole proprietor--the head honcho, the big cheese, all powerful Grand Pooh-ba. A sole proprietor has no partners and isn't incorporated.

Naming Your Business
Every business needs a name and you can simply use your legal name such as John Smith or you can do business as (d/b/a) John's Fabulous Writing Service or maybe Big Words Writing. If you use a fictitious name other than your legal name to do business, you may be required to file a D/B/A certificate. Check the Secretary of State website for your particular state to find out the requirements. Usually these forms are short and easy to complete and yes, a filing fee will be required. My state doesn't require a filing, but it is a good business practice to do so when using a fictitious name.  

Finances
This is the stuff you must get right, or you'll run into problems later on. Let's assume you're in the writing business to make a profit. How will you know when you've made one? How will you know if you've lost money? Where do you start? It can be daunting unless you have experience with financial reports, but if you have a stream of income flowing in and expenses going out, it's time to get organized.

1.  Visit the SBDC near you. Most area community colleges have a Small Business Development Center (SBDC). It's a great resource for the business-challenged and seasoned business person as well. Make an appointment with a counselor to get off on the right foot as a CEO. Those one-on-one sessions are FREE! Most centers also offer a schedule of classes on a wide variety of business topics. Usually registration fees are low and you'll meet other entrepreneurs like yourself. It's a wonderful way to network and learn at the same time. The Small Business Administration also has lots of resources for start-ups. 

2. Open a business checking account. It's much easier than trying to trace income and expense through your personal accounts. My bank gave me one for free with a low minimum balance. Consider including an additional signer --a spouse or trusted family member/friend who can deposit or pay bills for you when necessary.

3. PayPal is an excellent tool to pay bills and get paid. You can connect your business account to PayPal and a credit card. Reports are easy to generate from the site. Payments are secure and a breeze. I use this service to pay my vendors. An invoice and payment receipt are easily generated and I have all the documentation needed for the transaction. You can set up your account in just minutes. 

4.  Accounting. Before you throw up your hands and run screaming from the room, take a deep breath. Yes, you need to keep records of income and expenses. After all, it's how you determine if you've made any money. And that's important. Good records are vital for your income taxes. There are some free accounting software programs out there like Freshbooks or Wave Accounting which receive good reviews. Quick Books is popular, but isn't free. An accounting background is extremely helpful if you go with Quick Books. I don't recommend it for anyone who hasn't ever thought about a debit or credit. You can also set up an Excel spreadsheet with the basics. Quite a few accounting templates are available to assist you in getting started. You need a worksheet to track money coming in and a worksheet to track money going out. A balance sheet summarizes money in and money out, showing a profit or loss.  

Time Management.  I'd much rather be writing an exciting scene in my next novel rather than filling in information on a spreadsheet. However, with a bit of discipline, you can take care of this once a month in a couple of hours. It is worth the time and effort. As the CEO of your business, you want to know where the business stands on a regular basis. Key to getting it done with a minimum of fuss is consistency in your documentation. I maintain a file with paid invoices, and keep another one with income docs. My royalties are deposited monthly in the bank account. Once I receive the payment notification in my email, I print out the report. As soon as I make a business purchase the receipt and/or invoice goes in another folder. There's nothing more exciting than seeing income exceed expenses. If it doesn't, I have a meeting with myself to figure out how to make that happen. Otherwise, I congratulate myself on a job well done, treat myself to a cookie, and plan next month's book promotions.

Credit. Do you need it?  I always caution against going into debt. Giving yourself some start up cash from your personal savings account is a good way to start. I began with a measly $500 and was able to put the initial investment back into my personal account within a year. However, a business credit card can be useful or if you already have several credit cards, dedicate one to just business expenses. Make sure you know which card is personal and which is business. Getting them mixed up creates headaches. Pay it off in full every month. Sound advice for any credit card.

Cold Hard Truth.  Writing isn't a get-rich-quick scheme. It isn't even a get-slightly-rich-quick scheme. If you do, good for you. But hard work, and writing the best you can while constantly improving can provide steady income. Lots of freelance opportunities are available and if you're novelist or a writer of non-fiction, there are plenty of venues to put your work into the hands of readers. Be a professional in your writing and running your business. With perseverance and hard work, I believe your balance sheet can make you smile.

Remember tax advice comes from your accountant and legal advice comes from your attorney. Everyone's situation is unique. The information presented here is of a general nature. Always seek out the appropriate counsel.

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