Accounting And Tax Services For Writers

You started writing because you love it, but it can be years before you become a “working” writer. Eventually as your craft blossoms into a profit-generating enterprise you will begin to wonder — at what point does it make sense to incorporate?

The short answer … You are ready to incorporate if you consistently earn $150,000 and above on annual basis. Other important considerations are your legal, agency, and management fees. Are they above $15,000 annually? If you do not pay more $15,000 or 10% of your earnings, it might be more beneficial for you to be an employee of the production company who pays an employer share of FICA taxes on your behalf. You might be advised to start a Loan Out to be able to write off expenses, however, someone earning less than $150,000 might not generate enough business expenses to offset Employer FICA taxes. I perform a comprehensive review of client’s expenses to determine whether incorporation makes sense.

It’s worth incorporating only when the amount of money you save offsets the administrative cost of establishing and maintaining the corporation.

Writers and other creative artists can establish what is known as a “Loan-Out S-Corporation.” This means that the corporation will “loan out” your creative services to the production companies for which you write.  A Loan-Out S-Corporation is a one-shareholder entity. Even though the main benefit of corporate structure is a limited liability for the owner(s), it presents numerous tax benefits for Writers.

The Loan Out S-Corporation is a desirable business structure for some writers who have consistent and solid earnings and pay significant legal, agency, and management fees.

A very important calculation to perform prior to incorporation to ensure that the tax benefits of having a Loan Out S-Corporation outweigh the record keeping, payroll service, tax preparation, and corporate compliance taxes. It is a complex calculation with many movable parts dependent on Writer’s overall income and expenses. The goal of this calculation is to save enough in personal income taxes for the Shareholder to offset compliance and record keeping costs of the Loan Out S-Corporation.

Loan Out Corporation is complex and requires professional record keeping, a subscription to payroll service and a separate tax return. Consequently, a writer should engage a qualified Accounting Firm that specializes in Entertainment Accounting to handle all corporate reporting requirements.

In addition, we strongly recommend hiring an attorney when forming an S-Corporation. For the majority of our clients, their entertainment attorneys will set up their S-Corporation at no additional charge.

Sole Proprietor – Schedule C Filer
Some of my clients are happy sole proprietors for years and love the simplicity of the business structure, minimal filings, less fees paid for compliance, and the simplest tax structure. Another pro for being a sole proprietor is that it is easy to start as well as to close. You don’t need the assistance of an attorney and you can use your own name as a business name.

S-Corporations – “Loan Out”
S-Corporations are more complex. They require separate tax returns and a payroll service. We strongly recommend hiring an attorney when forming an S-Corporation. For the majority of our clients, their entertainment attorneys will set up and keep up their S-Corporations at no additional charge.

Writers and other creative artists can also establish what is known as a “Loan-Out S-Corporation.” This means that the corporation will “loan out” your creative services to the production companies for which you write.

A Loan-Out S-Corp is a one-shareholder entity which loans out personal services of its shareholder. Even though the main benefit of corporate structure is a limited liability for the owner(s), it presents numerous tax benefits for writers.

The Loan Out S-Corporation is a desirable business structure for some writers who have consistent and solid earnings and pay significant legal, agency, and management fees.
Another important aspect to consider, do the tax benefits of having a Loan Out S-Corporation outweigh the record keeping, payroll service, tax preparation, and corporate compliance taxes? Loan Out Corporation requires professional record keeping and subscription to payroll service. Consequently, a writer should engage a qualified accounting firm to handle all corporate reporting requirements.