Independence - To Incorporate or Not to Incorporate?
some bum sitting at home scribbling in notebooks or pecking away at your computer you show your attempts to get contracts. The searches, the proposals, the correspondence. And, if you are writing articles as well, you show them your drafts, your finished products and your query letters. Oh, and your rejection letters too. Keep it all.
This is what is called, "value-added" work. Include your membership fees, your expenses to conferences, your subscriptions to publications, even the weekly newspaper that you read for the classifieds. All of this proves to the IRS that you are acting like a writer and are attempting to get contracts. It shows the IRS that you are trying to make a living and are attempting to become profitable.
I think that for a sole proprietor, you have to show a minimum of 500 hours a year. Which, if you break it down, comes out to something like 10 hours a week. So, make sure you keep records to show you've spent at least that much time at your writing.
There is something called the three out of five rule. It means that the IRS would like you to show a profit in three of your five years in business. Now, event the IRS knows that it can take years to become published. So, not showing a profit for three or even five years isn't uncommon as long as you keep good records.
I've been incorporated since 1998. I wouldn't have it any other way.
But, incorporating is a big decision and shouldn't be taken lightly. I suggest that you:
Review your long term goals.
Go over the advice I've given here.
Read the information in the links I've provided.
Talk to a CPA or other financial advisor.
Discuss the decision with your significant other, if applicable.
Only after you've looked at your options, then make the decision to incorporate, or not to incorporate. It's all up to you.
Latest Articles