Disclaimer: I’m not a lawyer, tax professional, or anybody who can give you financial advice you should follow, without first consulting with a certified professional in said field.
I get a lot of questions about the business end of things from newer creatives… and if you read a lot of books on comics, you’ll find that they often Frankenstein creator and writer together.
Here’s my insight;
The whole current concept of income is a rigged game, by an over-reaching government who wants to steal as much as they can from everyone. Every year they make it more difficult to navigate business. In the end, you’re gonna get screwed no matter what you do, all you can do is do your best, to get screwed the least possible. You won’t have the resources for an army of tax & financial professionals like the big corporations, but you can take a nod from how they do it; be transparent and honest with everything you do, but take advantage of everything the system lets you take advantage of.
Some specifics;
#1) Find out how YOUR STATE handles business differently than other states.
For example; New Hampshire, doesn’t recognize “S Corporations,” to them all corporations are viewed the same. Some states like Vermont, tax business inventory.
You need to identify the pros and cons of your state’s handling of different business entities before you even consider doing anything.
#2) Business Structure ONLY MATTERS if you’re making money (or moving significant amounts of money).
If you’re a freelancer and you’re pulling in a few bucks annually, there’s really no need to do anything. You’re standard personal income deductions most likely got you covered.
Caveat: If you’re about to do a new venture of some kind and you plan on losing a ton of money, that is to say, spend out a lot of money on producing something but not gaining that same amount back, then there may be reason to structure things properly, so you can actually carry those losses FORWARD against future tax years. That can save you some money.
#3) Pay Attention to your money.
So if you’re not significant money, you’ll probably just absorb everything as personal freelance income. It’s super important to keep exact, precise track of all your personal freelance income and all your expenses specifically associated with that.
Not only will keeping track of your money signal you as to when you might consider moving to an actual business entity… but it’s going to get you into the habit of paying attention and staying organized and this is key to NOT GOING INSANE when you run a business.
#4) “S Corp” tax status when the main point of your business is to PAY YOU.
This is usually the best bet for the Small individual Freelancer.
When you start making money, in most cases, you’ll want to create a business structure that can elect “S Corp” tax status.
In a nutshell, this means the business is a separate entity then the owner(s), but all tax liabilities flow through to the owner(s).
I’m talking specifically with a “C corporation” that elects “S Corp” status, but a Limited Liability company can elect “S corp” status too. LLCs are a bit different than a standard corporation, but in the end, the tax footprint is pretty similar either way.
“S corps” will give you some financial relief, as compared to simply being responsible for all your income, yourself directly, if you just freelance as an individual under your own name.
#5) Standard “C Corp” when the main point of your business is keeping the money in the business so you can produce shit.
C corp is the standard, base corporation. They are a legal entity separate from the owner(s).
The main thing about a C Corp is they they are double taxed. Which means this;
If your Comic Publishing C Corp, MAXIMUM COMICS sells a bunch of comics and makes $100,000 profit in one year. Then Maximum Comics pays corporate tax on $100,000…
BUT, if you distribute those profits to the owners of the company let’s say that’s YOU and your boy Joey Noodles; then You owe taxes on $50,000 and Joey Noodles owes taxes on $50,000.
The Gooberment just taxed y’all TWICE on the same chunk of money.
So why would you ever want to run a C corp!?
Because if you don’t need to distribute those profits…
if you don’t need to pay yourself a lot of money as salary, and instead want to keep the cash in the company to actually produce shit… like comics…
C corps have some advantages over pass through entities such as “S Corps.”
To put it very briefly, C Corps are seen as “real independent businesses” and given more perks and wider birth to get their shit done.
When you do business yourself, directly under your own personal name, you don’t have much if any extra paperwork to file. There’s no annual licenses to pay or keep track of and you basically do your taxes once a year.
Once you start a business entity, you’re going to have a new hobby… it’s called, “Business Stuff.”
It entails keeping records and running around like a chicken with its head cut off trying to make sure you are compliant with whatever bullshit the government says you need to be compliant with…
And believe me, there is plenty of bullshit.
But at the end of the day, the bullshit is part of the cost of doing business… Like I said, if you’re not making any money it probably doesn’t pay to bother with any of it.
But once you’re making money, you pretty much have to get into the game… if you don’t you’re just burning your money.
ok, those are my 4 tips for today;
I’ll come back and update this page when I have more specific to ad. ▪
About the Author —
Nick Macari is a full-time freelance story consultant, developmental editor and writer, working primarily in the independent gaming and comic markets. His first published comic appeared on shelves via Diamond in the late 90’s. Today you can find his comic work on comixology, amazon and in select stores around the U.S. Visit NickMacari.com for social media contacts and news on his latest releases.