When should an author start an LLC?

I spoke to a young author recently, who asked me when he should start an LLC for his writing business? I asked him the first question every author should ask themselves:

Are you a business or a hobby? He wasn’t sure how to answer this, so I asked him some follow up questions:

Q: Why do you write?
A: Because I like it.

I kept pressing.

Q: Is your author business profitable?
A: It doesn’t pay the mortgage.

Q: Can you be more specific?
A: I haven’t made back the $70 yet that I spent on editing.

I had heard enough. I then told him what he needed to hear:

You’re still a hobby! You’re not a business… yet!

I explained that there was nothing wrong with writing as a hobby. In fact, I told him to enjoy his writing journey. But he shouldn’t have any expectations that his writing hobby will generate enough money to be a profitable business, much less one that would “pay the mortgage.”

In other words, it is premature for an author to spend the money to set up an LLC for his/her author business, until it’s a business.

When he dedicates his time, talents and treasure to his writing, then and only then, does he have a business?

A writer is running an author business when he/she:

  • Writes to a market (not just writes what it wants).
  • Invests in his/her brand: professional covers, editors, formatters, an author website, etc.
  • Protects that brand: copyrighting, trademarking its names, and forming an entity.
  • Invests time and money into marketing.
  • Constantly learns from the changing market and refines its practices.
  • Is profitable – Any business in any industry must be profitable if it is to exist long term.

In short… When you are involved in the business of writing, that is when you should form a writing business entity.

Learn more about when and how to form an author entity in Entity Set Up: Why and How Authors Need to Create a Business Entity Now (Self-Publishing Empire).