What is an NFT and what does it mean for publishing?

There is an ebb and flow when it comes to crypto hype.

Just like the value of bitcoin and etherium swing up and down, so does the hype, but that doesn’t mean that the crypto-world isn’t maturing or should be ignored.

It’s hard to get your head around what is going with all this crypto blockchain stuff because it’s so deeply rooted in technology, and many of the early adopters are from the fringe.

From a very high level, what is going on is that technology exists that allows you to create permanent, redundant encrypted records to the internet.

The latest is the use of Crypto to show ownership of digital and, yes, physical goods. I’ll break down what I’ve learned and what I see as the future of this technology and its impact on publishing.

The news has been full of some recent big sales on the primary and secondary market for digital goods associated with NFTs. Here are a few of the latest stories that have broken.

The Beeples art drop

Kings of Leon

I got sucked into this world through some work I’m doing with a client to design an Instagram filter. On the call with the designer, he suggested I learn about Non-Fungible Tokens.

I did…

After over 20 hours of sitting in Clubhouse rooms, connecting with thought leaders and artists, this is what I’ve pulled together.

  1. This is the future
  2. Set aside your FOMO its early days, and there is a lot of pioneering
  3. Publishing, copyright, and intellectual property will be revolutionized
  4. There will be endless possibilities to monetize IP and create perpetual revenue streams

Let’s begin with what an NFT is and how it works. A Non-fungible Token is a digital identification with associated metadata that is saved to the blockchain. To simplify this further, think of this as a digital contract, and proof of ownership is preserved across the internet. It can’t be lost or destroyed because it is redundantly saved in parts across thousands of computers.

So what…

These contracts have existed for some time, but recently artists have been using digital tokens to create limited edition digital art and show ownership.

The CryptoPunks were an early NFT. A fixed set of 10,000 was launched in mid-2017 and became an inspiration for the ERC-721 standard. These retro graphics have sold for thousands of dollars.

Another example is Gods Unchained a free-to-play, turn-based competitive trading card game in which cards can be bought and sold on the OpenSea marketplace.

Players use their collection to build decks of cards and select a God to play with at each match’s start. On OpenSea, cards can be sold for a fixed price, auctioned, or sold in bundles.

The main area where this has been taking off is a fine art. There has been more digital art sold in the last two weeks than the previous five years.

Some believe this is a seminal moment that these works will be historically significant for digital art. Christie’s is facilitating the sale of digital works means there is interest from the mainstream art world.

How does this impact the independent creator?

The NFT provides an open standard for contracting and ownership that is agnostic to platforms and is established at creation. This will be a brave new world. Here are a few topics to keep an eye on.

Royalties and smart contracting

One exciting feature of an NFT smart contract is embedding a perpetual royalty. Imagine as a content creator you create a limited-edition ebook with illustrations that you sell for $100 and sell 100 copies. Cool, you just made $10,000, but NFTs allow you to embed an ongoing royalty, let’s say 10% for easy math.

If one buyer sells their copy in the secondary market for $500, you get another $50. Every time there is a transaction, you’ll get paid your percentage. This creates a situation where rare collectibles that sell in a secondary market benefit the original creator.


Markets are opening up and marry the NFT with community and gamification. A prominent example is NBA Top-shot, where you can buy, sell and trade NBA player cards.

A LeBron James Top-Shot has sold for over six figures. They will introduce augmented reality and fantasy sports elements to create an experience.

VeVe.me is a collectibles marketplace where you can buy pop culture collectibles and display them in an augmented reality showroom. There is also a resale market.

Niftygateway.com is an NFT marketplace for art and music with a resale market

Rarible.com is another platform for minting and selling NFTs.

Opensea.io is another marketplace where people resell NFTs. You can see details of transactions and market movements.

Imagine a near-future where, through augmented reality, digital collectibles can be seen in the actual world. Where people are showing off their one-of-a-kind or limited-edition digital art or playing songs, they have sole ownership of.

In publishing, how ownership and authenticity are tracked will change. Will, there still be piracy, of course, but there will also be piracy bots that will identify abusers.

Imagine that you produce a limited-edition anthology where all the contributors continue to get a royalty every time the editions change hands.

Web 3.0

You may be concerned about the big tech and what types of information and control they have. The next generation of the web will be fundamentally different with data encryption in a decentralized data structure using machine learning and augmented reality.

Just like the internet moved from lifeless billboards to cloud computing and social networks, the evolution is to the tools that those on the bleeding edge are using. Right now, the market isn’t easily accessible. To play freely in this market, you need to be using cryptocurrency.

Is this a Hot Potato?

Could this be a bubble that leaves you holding an overpriced jpg?

Of course, that’s how collectible markets work. This is all speculative if you’re looking to profit from reselling and don’t see value in just owning the collectible.

Yes, some of these items will become culturally significant and will retain value. Others won’t.

What should a content creator be doing?

Think about how you can translate your intellectual property into a collectible that will have value in your community.

You’ll hear folks looking to take advantage of the hype. They will burn out and fade away. If you are looking to build an experience and lasting value around your creativity, then focus on building a community and how that community can tie their identity to your work.

If you want to investigate further, here are some resources


NFT bible on Opensea


Treating your Writing Like a Business

You’re in the business of writing if you intend to earn a living from your writing. Regardless of your decisions around how you publish, you’re going to need to think about what you’re doing as a business.

The obvious question is, what does that mean?

The statement “treat your writing like a business,” or “put your CEO hat on,” gets thrown around in forums and conferences, but there isn’t much clarity as to what exactly that means or how to do it!

I had an experience where an author said to me, “I know that I need to treat my writing like a business, but when I really thought about it, I didn’t know what that meant.”

I’ll give you my take on it right now.

There is the actual formation of a business; a legal charter by a state recognizing the establishment of a legal entity. In this case, one that would transact and conduct operations to publish and sell books.

This is not what I’m talking about.

Yes, we’ll cover sole proprietorship and incorporation a bit later, but at this point, what we’re discussing is the business operations, and function of the business. How to use business practices to optimize the results.

Specifically, I’m talking about a process that turns your creativity into cold, hard cash. In its purest form, you write a story, and someone pays you for the right to read, hear, or see that story. 

Today, your chances of making a sustainable living from your story creation are better than ever. As you produce these stories and gain success, you create more and more value. There will be a further exposition on this topic in the next foundations,” the Golden Age of Content Creation, and “the Reader-Writer Relationship”. “The value you create is in writing the story, but to capture that value and convert it into cash, you need to sell the use of that story to someone who sees its value.

The Value of Any Business

Let’s talk about what makes a business valuable.

All businesses are valued on free positive cash flow. There are generally accepted valuation methods used to determine the value, and they always go back to the positive free cash flow produced.

  • • Earnings per share; the portion of profits attributed to each share of stock
  • • Multiple of EBITDA, based on the industry
  • • Discounted Free Cash Flow

When a business is for sale, the buyer and seller will negotiate on what they feel the company is worth. The seller is focusing on the certainty of future cash flows, while the buyer focuses on the uncertainty of those cash flows. No one is arguing about what is being valued, just on what credibility we can give to the cash flow projection.

The point is that a business’ value is tied to the amount of reliable and repeatable cash flow it produces. Now, in your case, you’ll produce a positive cash flow from publishing books. Eventually, we will broaden this to selling our content, and not limiting the business to just books. The way you make money (as long as it’s legal) isn’t what we’re talking about. This is about you embracing the idea that what you are setting out to do is all about generating a positive cash flow.

The more cash flow your business can create, the more it is worth. The more that others can project into the certainty of that cash flow continuing, the more the business is worth. Now you know the only way to value the business is the cash flow it generates.

Once your creative process begins producing a profit, things get complicated. You must pay income tax on the net profit. The keyword is “net”. The IRS understands that a business has expenses in the process of making a profit, and expects you to pay taxes on that profit.

Revenue – expenses = profit

But profit isn’t cash flow. Free cash flow is the actual cash the business has generated after paying all its bills and taxes. That cash can stay in the business to pay for growth initiatives, or come out to you.

Here is where we begin to unpack what is meant by treating your writing like a business. 

Some authors take the approach that they don’t look at how the business is performing because

– They hate to see how they are doing,

– They don’t know what they are looking at,

– They have an accountant that does their taxes for them at the end of the year

– They trust their spouse to do the right thing for the family

The head-in-the-sand approach of only looking at your expenses when tax time comes means you will pay more than your fair share in taxes. Furthermore, you’re not using the tax code as a tool to maximize your cash flow. 

You see, when you’re getting started, you need every dollar to be focused on working capital. 

What you’ll learn in this book is that, rather than being reactive at year-end, a good businessperson uses the tax code proactively. What I mean by this is understanding what you’re trying to do, and then finding the tax code that gets the best result for your investor. Sometimes that may mean paying more in taxes, but more on that later.

You see, using business tools helps to make the business more efficient. Efficient at what?

Producing cash flow. 

The more we conserve and create, the faster you can get the business to stop looking to you for money, and grow enough to start paying you. Reduced tax liability will provide more cash for you to fund your business operations, and scale up faster to hit your goals. 

This is a mistake many new entrepreneurs make in saying “I’ll worry about that stuff when I get bigger”. By not being proactive, you slow your growth. In the beginning, each dollar that we can keep to reinvest gets us to our goals faster.

This brings us to a key concept: function and success for your business.

I’ve come up with five statements about the function and success of your business. In statement one, I qualify how the firm will produce a positive cash flow for publishers. If you were to take out the first statement and the word “publishing” from the other statements, then the remaining four could apply to every business.

1. All publishing businesses are built on the reader-writer relationship (Keystone Mutualism); without a substantial and growing base of readers that enjoy your work, the business can’t function.

2. A functioning business produces enough positive cash flow to fund its operation and achieve investor goals.

3. A successful publishing business funds and delivers investor goals.

4. Most businesses fail because they lack functionality.

5. Most businesses don’t succeed because they haven’t defined success

Your goal is to create a functioning and successful publishing business. It is functioning when the cash flow is positive and supporting the business and investor goals. We will be clear on what success is when we identify what the investor expects from the business. 

That’s really what this whole book is about. If you’re treating your writing like a business, you’re looking for your writing to produce a positive cash flow. That cash flow is used to fund the business, and to deliver a return to the investor—in this case, you. Yes, you are an investor in the business. Most small business owners never think about how they will put more time and money into the business than anyone else. Nor do they have a clear idea what they want for that investment, I’ll go deeper into this idea in the “Your Role(s) Foundation.” That means the investor may need some help getting clear on what the expectation is from the investment.

If I were investing in your business, I would be looking to get a double-digit return on my cash. If it was a start-up venture, I might be looking for a multiple, like two or three times my money back. For you, it’s different. You’re getting the benefit of living your dream as a writer, and that can cloud your judgment. This isn’t personal or unique; just about every solo operator ignores the needs of their investor when they are both owner and investor. The CEO of your publishing company is also likely to be a lousy employer, having you work long hours and not providing pay or benefits.

You also have a unique situation, where you’re able to get a return through cash as well as other benefits that may be more tax advantageous. We will explore how you can do just that. Finally, as we will discuss further in the “Roles” section, as your business changes and your life stages progress, what you’ll need from the business will change. Being clear on what the business needs to deliver will be liberating.

If your situation is like most authors, you don’t have much, or any, business experience. You don’t know what you don’t know, and as you begin to learn, you have anxiety about blowing up your chance as a full-time author with rookie business mistakes.

That all changes now, because this book is all about the business of writing.

A big part of what we will be doing is understanding the investor expectations. In some cases, rather than you as the investor imposing your expectations, you’ll need to get your mind right about the reality of your business. For example, in the beginning, all publishing businesses need to transition from the investor (you) being the primary source of capital, to generating that working capital from book sales. Understand how long this will take and that, until this happens, your desires for what this business will do for you are on hold.


Treating your writing as a business means using business tools to optimize for functionality and success.

A successful business delivers on investor goals. 

functioning business produces enough positive cash flow to fund its operation and achieve investor goals.

To be a good investor means having clear and realistic return goals.

Your measurement for business success is in the amount of free cash flow you generate.

Darwinism in the Golden age of Content Creation

Part 1: Giants Strode the Earth…

While most folks are familiar with the end of the dinosaurs (Cretaceous period), far more life was wiped out below the sea. This mass extinction was at least the fifth mass annihilation scientists have identified, where 80% of all life was obliterated.

As we are such an arrogant and self-centered species, few of us rarely think of what a small percentage we make up of life on earth today, and how we are an even smaller slice of the pie of the overall life that has strode, slithered and swam on the earth.

What does this have to do with being an author?  Well, everything and nothing; I mainly want to keep you entertained with evolution and dinosaur metaphors while I talk about the ecosystem that authors live in and the changes going on in that ecosystem. Ready? Let’s go…

One storyline is that open digital publishing (Amazon, Kobo, iBooks, Flipkart) have destroyed publishing.  They allow any hack to publish and they are in turn, killing off retail book sales. For some, this is their reality.  For others, this new era after the digital publishing meteor struck is a new golden age of content creation.  For those who choose this view of reality, life is pretty good.

A lot has changed in the publishing world and even more, has not. Indie authors should understand their place in the ecosystem and how they may need to adapt so they do not die.  If this is the golden age of content creation, what will you need to do to thrive in it and what could be your undoing.  I won’t get into what might be the next cataclysm but will explore what I believe the important adaptations are required to survive in the current era.  Let’s go mix some economics and ecology.

The basics of economics are supply and demand.  The process of supply and demand equalizing determines the price.  In the ecosystem of content for reading, demand is the reader and supply is the author.  In a perfectly efficient market, your book goes to every reader who would want to read your story delivered in the format they desired, paying the maximum they are willing to pay.  Everything else is friction, and friction is not cool. (imagine Neegan saying that last sentence to Rick on the walking dead

So here is our little circle of life.  The Reader-Writer Organism, a symbiotic relationship that the whole ecology is based on.  If it fails, then all will die.  Readers read, excretes cash, Writers consumes cash, excretes story.  This can be done over and over with more and more readers and writers, but since they don’t have my magic story – cash transfer system, we have the marketplace to do this exchange and the market is supported by the friction.

Friction reduces the ability to connect the reader and writer and absorbs portions of what the reader pays. The friction (costs) come out of the value created by the writer.

In the Trad Pub Era

The Technology acceptable to the mass market required a physical product: a book, movie or CD to tell the story.

The network facilitator had a system where a human being vetted and curated products to an audience they looked to serve.  To reduce costs, the physical product was mass produced and a system evolved where various customer engagement networks tried to reduce friction to secure more “value” in the delivery system.

Readers had limited sources for content consumption.  The channels were controlled and regulated.  The channel regulation, typically called gatekeeping, was partially designed to vet product that would be better consumed, but the real friction we now know was created by how inefficient the process was in connecting content creators to content consumers.  The system was weighted towards delivering more of what was successful in the past as the risk-reward on content diversity was low.

Instinct was to look for more writers who could serve the demand that the network provider was already serving.  I’ll talk more about this in other blogs.  The wind up for this era is for the readers and writers in it, the system worked pretty well.

Now the Meteor Hits…

This is typically referred to as market disruption, not nearly as cool imagery as the Amazon Digital Publishing Meteor smashing into the trad pub world.

Scientists presume that not all life was eliminated in past cataclysms, and certain creatures like gastropods are still crawling after 444 million years.  So not everybody dies, and the ones who survive, adapt, and many times thrive in the new conditions.

The Early Indie Era

Conditions created after the meteor strike are much different now and for some the perception is doom, but for other survivors, the conditions to thrive are better. Now you may be expecting the comparison of trad publishing to the dinosaurs, nope.  Trad publishing is a biome. A large naturally occurring community of flora and fauna creating a major habitat. This habitat still exists after the meteor strike, but the strike has created new biomes.  Biomes that produce less friction and thrive on that lower level of friction.

The Reader Writer Organisms adapted to this new age by moving to a biome where environmental conditions were more suitable. The combination of the search engine function and data analysis of customer buying behavior has changed all shopping.  This isn’t about bypassing the gatekeeping system of traditional publishing.  It a more hospitable ecosystem for the circle of life. Yes, the trad pub system is still working, but its conditions are less favorable to other biomes

The abundance of life

With less friction, we now see that the demand is much higher than anyone thought.  This is a good thing because with this demand there will be more need for supply.  The demand is further augmented by the digital product lowering the cost of goods to where the supplier can access additional demand through reduced price.  Think of it this way, the reader consumes content and excretes cash, the author consumes cash and excretes content.  A portion of the cash goes to supporting this biome and a biome that can create less friction and live on less friction will thrive because more of our little circles will grow there.  Right now, it just so happens that the best ecosystem is Amazon. The point is that the biome won’t survive without creating the ideal conditions for the flora and fauna it needs.

This next point is critical for authors to understand.  In the new indie era, more millionaire authors have been created than in all prior publishing history.  There will be even more in the future (woohoo) but your probability of becoming one has not changed (what?).  Here is what I mean, and this has been validated by surveys I have done, author earnings I have received, as well as other sources.

The distribution of earnings has not changed, only the (n) population has changed.

The distribution (bell curve) is exactly the same as it used to be when it comes to the percentage (probability) of attaining a certain revenue level as an author. What has changed is the population that the distribution is applied to.  The cold, hard facts are that 80% of authors will never make more than $10,000 in a lifetime from writing.  Sixteen percent will make around $10,000 a year; everyone else making more is in that final four percent, including the millionaires.


% chance you make over six figures 1%

Trad Pub Era: Number of authors = 100 1% x 100 =1

Early Indie Era: Number of authors = 1,000 1% x 1,000 =10 (This means more millionaire authors)

While the pool of demand gets bigger it now also creates more content producers.  In turn, more demand is met but also more cash is consumed by the growing pool of suppliers that are being created.

This new era is abundant with life because the cataclysm changed the ecosystem in ways that reduce the friction and exposes the demand. The heavy hitters of the trad pub era are not organisms who can adapt, but biomes that the essential organisms are migrating away from or not choosing to habitat in the first place.

Authors tend to feel weak and defenseless, first against the big five, now Amazon.  They are portrayed as the big looming beasts or predators.  I don’t like this analogy, instead, they are a biome that is reliant on the reader-writer circle of life.

How to not just be a survivor, but how to adapt.

It is my belief that as a content creator, you need to focus on the most economical and robust system for connecting to the demand.  The shortest path with the least friction will be the one that will last or replace the existing solutions. While a direct 1:1 relationship is the shortest path, it may not be the easiest for everyone.

So how do you not only survive but thrive?

  1. Work to find and nurture demand (readers) and give them the shortest easiest path(s) to your content. Connect with the demand so you know, where, and how they want your content.
  2. Quit eating each other. Authors that continue to get sucked into the high school mentality on Facebook and attack each other, rather than understanding they are running a business will eventually be wiped out. The indie author species needs to evolve and build a society where it works as a unit.  This means acting like adult business owners and ignoring those that don’t
  3. Be deliberate and treat your writing like a business. That means doing stuff you don’t want to do (business stuff)

What about the Biomes?

The biomes (platforms) that thrive will be those that best nurture the money creating organism through eliminating friction and helping to kill off parasites. If there is another cataclysm that destroys the Amazon Biome, I guarantee it will be replaced by a better, more efficient one, that the reader-writer organism can move to and then flourish.

Joe Solari Is the author of “Advantage”

He seeks to help authors be better business operators and excell at the business of writing.

Finding Legal Support For Your Publishing Business

Who’s on your team? Do you have a team? Let’s explore building out a support team for your indie publishing business with a focus on legal support.

A growing Indie publishing business will need expert legal services at some point. That’s not to say that you’ll be sued or will need to sue someone, rather that you’ll need to protect and license your intellectual property. Rather than waiting until you need help, a good CEO looks to put a qualified team in place before the need to give the team time to understand your goals and execute a proactive plan.

If you’re like most authors that are self-publishing, your legal strategies are non-existent or DIY. This is not sustainable if you’re scaling up a significant business. Now, I’m the guy that helps authors set up their own companies, so I advocate doing some things yourself rather than hiring a lawyer, but when it comes time to protecting or licensing your intellectual property, arrange for help ahead of time. You’ll want to find a team member that understands what you plan to do with your intellectual property and has the know-how and network to make that happen.

Here are some points to keep in mind as you think about when you should begin building your legal support team.

•    The CEO is responsible for pulling together the best support team for your business.

•    Build your team proactively rather than reactively.

•    It’s not about having a lawyer but having the right lawyer

•    Check the “scarcity mentality” at the door.

I thought it might also help to bring clarity to the bullet list by sharing some of my experience with hiring lawyers. An instance when my partner and I raised money for a start-up business and how mindset and our selection of lawyers helped to accomplish the goal.

The CEO is responsible for pulling together the best support team for your business.

Being the CEO of your indie publishing company means you have to apply effort to get the right team in place. Creating a support network is hard when you’re trying to do everything, including the extra work of building for the future.

Remember you are the limiting factor of your business. This isn’t a criticism, rather a way to free you from those limits. By accepting that your business is constrained  by your capacity to do work, your capabilities, and experience; you can identify the most significant limitations and figure out ways to remove them. One of the fastest ways is to bring in an expert to your network where you are a novice.

Build your team proactively rather than reactively.

Indeed, with the legal profession, it is far better to have relationships ahead of time rather than trying to find someone under the stress of some legal issue you face.

Be clear that you’re proactively looking for ongoing legal support. Ask the candidates who think are some of the best and worse firms. Explore their networks, and ask who do they know, what types of work are they are known for handling? Look to build a relationship and pay attention as to how interested they are in what you are doing.

Most importantly, do this work before you need a lawyer. Most business owners don’t interact with lawyers until they need one then they settle for who is available. We must intend to build a world-class team, not fill some slots for a local pick-up game.

Knowing you’ve done the work ahead of time to find the best lawyer will give you comfort if something comes up. We tend to rationalize our decisions after we make them even if the choice was based on convenience.

Write out the information used to make the decision, including a pros and cons list behind your choice.

It’s not about having a lawyer but having the right lawyer.

When my partner and I decided that we were going to bring in investors for our business his first recommendation was that we choose a particular law firm. The firm was one focused on Mergers and Acquisitions, they weren’t the biggest, but they had a stellar reputation and a national footprint.

Now both of us had sole practice lawyers we were comfortable with and could have done an OK job for a fraction of what the other firm would cost.

The decision would quintuple our legal costs. That meant that 50% of that cost would be my burden if we didn’t raise funds.

The decision to work with the “bigger” firm was based on our plan to raise money. The firm we picked had experience writing contracts for private investment. The payoff came when we were introduced to a publicly traded company that wanted to invest in our business.

This public firm eventually put in 3x what our other investors did. Our ability to work with them was based partially on the fact we had a law firm they had heard of, but more importantly a firm that could figure out a deal.

You see, the investor was a Real Estate Investment Trust and it had special investment rules.  Our legal team was able to work with the Investor’s legal team to craft a compliant investment, something my sole practitioner would have been out of his league on.

Amid this negotiation, it was clear that we were going to rack up over $100,000 in legal fees. When we talked with our potential investor about this not being part of the budget, they explained that they understood and since the investor brought complexity to the deal, they would increase the funding to cover legal fees.

They also were comfortable enough with our law firm to split responsibilities for paper parts of the deal giving us control over the language in many contracts rather than having it dictated to us.

Without having a law firm that had the capability and reputation I am confident the deal would have fallen apart.  We had the right members on our team to play at the professional level.

Check the scarcity mentality at the door.

Select the right lawyer based on qualification, expertise, and network, not on the hourly rate.

I know that for many the concern is cost.  Lawyers, certainly good ones come with high hourly rates.  That can influence your willingness to look at top tier IP firms.

Your intellectual property and business deserve the best.

Keep in mind if you are honest and upfront about what you are doing most Lawyers will give you some time to see if you should establish a relationship.

Help him or her understand your business and budget. Likely much of your portfolio work can be done by a lower cost associate under the guidance of a partner.

Don’t forget an attorney is a business person as well, and they aren’t always the best at drumming up new business. Help them to understand what you are trying to do in finding the best support.

Interview hard!

Remember you are looking to hire them not the other way around. This way you feel comfortable later when you do need to use their services.

Confirm they have

1.    the skills and resources to support your needs

2.    a network worth accessing

3.    a solid reputation

4.    Experience in the firm with litigation

Action Steps

1.    Identify the areas where you need ongoing help. If you plan to be licensing your IP then begin your search to find the best IP lawyers you can.

2.    Allocate the time to interview and build relationships with potential representation. Be clear to them about your process that you are interviewing them.

3.    Ask candidates about other firms to get more leads. Ask them for recommendations. Investigate and see if you hear the same names popping up.  For example, if you’re looking for the best divorce lawyer ask lawyers whom they used and see if the same name comes up.

4.    It’s not one and done. You can always change Lawyers. While it’s nice to make the decision and move on you should be talking with other authors about whom they use and continue interviewing.

With an excellent outside support network, you’ll have a number to call and better yet, a relationship where your support network has an understanding of your business and is eager to help.

Setting Up a Publishing Company? Don’t Make These Two Huge Mistakes

Don’t make these common indie publishing mistakes when you decide to start a full-time publishing business.

Your books are selling, your marketing is building a fan base and now you’re contemplating what’s next.  Maybe create a publishing company to manage your writing business?

The answer is yes.

When searching for advice about incorporation most of the posts are created by tax and legal advisors or websites that profit from filing.

In this article, you will learn the two most common mistakes and how to avoid them by creating a business structure that will serve you for decades.  Incorporating impacts your legal liabilities, your tax situation and your ability to get credit.  Let’s begin with the option of not doing anything.

Mistake #1: Operating as a sole proprietor – AKA doing nothing

One option is to do nothing. If you don’t set up a company you are operating as a sole proprietor.   Your business is an unregistered entity and the name of the business is not protected unless you have registered in your county to Doing Business As (DBA).

Legal & Liabilities

You have no corporate veil to protect you.  In simplest terms, you are the business and any liabilities such as owing vendors money can be remedied by claims against your personal assets.  Having the basic protections and separations of assets is important to protect your personal property.


Without a corporate charter or a formal DBA filing,  there is no record of your business name.  Most counties except sole proprietors to register for doing business as in the county.  Given the costs and time associated with the process, you may as well put in the extra effort and incorporate with the state you reside, to set up a company and get the added benefits.


The IRS does not require you to set up a business, just to claim the income from that business on your personal tax return.  In fact, anything over $400 requires reporting and self-employment tax.  Self-employment tax is the Medicare and social security taxes including the employer share that you see on your paycheck stub.


One way to reduce your tax liability is to deduct appropriate expenses including expenses that are essentially perks to you.  Want to go to that writer’s conference in Cabo?  You can expense the trip including all your meals and sundries to the business.  Previously, this used to come out of after-tax dollars and is now a pretax expense.  While you can do this on your personal return,  the expectation is that a business should have a substantial amount of expenses associated with operations including, travel, meals, car leases and computers.  Most of what you are paying for related to your business can be classified as a tax-deductible expense.

Mistake #2 When Setting Up an LLC

There are several types of corporate structures and while an LLC is one of the most common, in my opinion, it is the wrong one for Indie Publishing Companies in the United States if not set up correctly.  I will discuss why in a moment but let me first explain what is good about an LLC and what is bad to help you understand my reasoning.

First, what’s good about an LLC

An LLC is designed to be a pass-through entity meaning that profits pass to the owners and taxes are paid at the owner’s personal tax rate.

LLC’s allow for extreme flexibility, After getting your articles of incorporation you create an Operating Agreement that allows for all of the rules that the business will operate under.  This is helpful if there are multiple owners/partners and the need to specify different payouts and authority.

Maintaining them is usually easier than a corporation in that states typically have more record keeping requirements for corporations than an LLC.

What’s bad about an LLC

You are required to pay self-employment tax on the profits of the business.

As a member of the LLC, you can not be paid a salary with a corresponding W-2.  Any pay is taken as a draw against your capital account.

So what should you do when setting up your self-publishing empire?

What Should You Do?

No matter what advice you receive: from a lawyer or certified public accountant, it comes with the caveat that every circumstance is different and no responsibility is taken for the outcomes if you follow the advice given.  Of course the same goes with this article.  I can tell you what I think and what I have done and why I think it makes sense.

Either set up a subchapter S corporation or an LLC but elect with the IRS to have the LLC treated as an S corp.

This is a little more complex than starting just an LLC but well within the skill set of anyone who is running an indie publishing shop. The benefits are below:

You can pay yourself a salary and issue a W-2

The power of the W-2

If you are self-employed you know the pain of not having a W-2.  Anytime you go to buy a car or refinance your house and tell the credit manager that you are self-employed the options for financing are either diminished or expensive.  However, if you are able to provide a W-2 you can easily go through standard loan qualification.  With an S corporation, you will be a shareholder, an officer, and an EMPLOYEE.  This is impossible with an LLC.  This may not seem like a big deal now but it will be if you attempt to buy something big and need credit.

Reduce Tax Burden

Here is another benefit that is perfectly legal but only available to Subchapter S Corporations.

Since you can now be a salaried employee your Medicare, FICA, and state employment taxes apply to the salary you make.  You will need to adjust your salary in proportion to the overall revenue of the business.  The IRS is aware of the trick where an owner takes a low salary to keep employment taxes down.  A good rule of thumb is 50% of the operating profits.

The profits of the corporation would typically require you to pay corporate income tax but since you are subchapter S, profits pass through to you and you pay at your personal income level.  That means you save the 3-15% self-employment tax that you would pay if you had an LLC!

What Corporate entity should you choose?  You need to look at evaluate this based on the initial and ongoing costs for maintaining the charter and what give you the lower record keeping burden.  If this all seems too much then you can always go to an accountant or lawyer to set this up but it is something that can be done on your own with a little patience.


Below I outline is a multistep process that you can do on-line yourself to set up the structure that I suggest.  The only fees you will pay are to the Secretary of State for the registration of the corporate charter.  Fees will vary but they are all in the range of $200-500.  To find the State office you can get a FREE listing in my book “Should I Incorporate?”  You can download a pdf copy by clicking the button below or you can get a free copy on all of the major eBook platforms.

Click here to get a FREE copy

The Steps for incorporating

#1 Incorporate. Set up a company that is incorporated rather than a limited liability company.

This can be done online you will need to have a valid credit card and need to provide a permanent address and the personal details for the officers of the corporation.  Since you will most likely fill all of these roles you just need your details.

#2 File with the IRS and get the new corporation an EIN Number

An EIN number is your business social security number.  You will need it to set up accounts, file taxes and to set up a bank account.  EINs are obtained online for free.

#3 Designate the Corporation a subchapter S rather than a C Corp

The election and approval of subchapter S are handled by the IRS and is required to be completed before the end of your first tax year.  The form is here

This designation gives your corporation the benefits of an LLC in that it does not pay a corporate income tax, instead, the income passes through to the shareholder(s). There are rules and regs associated with this but for most solely owned small businesses you will never have to worry about going above the number of shareholders or other disqualifiers.  Please review them on the form before you apply.

#4 Go to your local bank and set up a bank account

With a bank account, EIN and articles of incorporation you now have all the necessary pieces for operating your publishing business.

#5 Change your KDP and other author account information to match your EIN and business bank account

With a bank account, EIN and articles of incorporation you now have all the necessary pieces for operating your publishing business.  The first things to do is switch your KDP and other accounts that provide sources of income to the business to use the business EIN and the funds going to your business bank account.

If you are interested in more details on how to start and operate a business then get a copy of the Treat Your Writing Like a Business (TWLAB)

#indieauthor #leanstartup #theentrepreneurmindset #kdpselect #20to50k #selfpublishing

Be Your Own Venture Capitalist: Investing in your start up via a 401K loan

In February of 2016, I finished up working at an oil and gas startup.  The decline in oil prices turned the business from a high growth company to one running out of cash.  As a result, the business sold its assets and I along others were out of a job.

Not two months before the collapse in the oil industry, the company needed to raise capital, and I took all the cash I could scrape up to invest further in the business, valuations were high and the market was hot so why not double down?!

The crash left our saving account empty, no steady paycheck and our family dependent on my wife’s income as a style consultant and book author.  She was doing OK, given she had started the business a few years earlier and now that our twin boys were older and she had more time.

I spent months interviewing for another full-time gig but preferred to concentrate on my own consulting work and independent publishing.  I was at a loss for how we could support the household while my wife and I both ramped up our businesses.  That is when my wife introduced me our current financial advisor, who helped me to understand that I had access to low-cost capital that did not require me to go through any approval process.  This concept was so successful that felt it important to share how you can tap into capital now and get your new business started or pursue a writing career full-time.

Setting the stage

Most small business startups are founder -funded and under-capitalized.  The research in the “Business Owner’s Compendium” shows the debt-to-equity ratio, for most businesses, is between 1:1 to 1:2 with $1,500 to $3,000 of debt and over 80% of that funded by the owner’s personal credit cards.  Credit cards are the most common and expensive start-up capital.

Back to the Story…

We could not use credit cards we would need those for emergencies and the amount of money needed to float a family of four for six months exceeded our credit limit.  Dory reviewed our financial situation and offered a solution.

My wife and I had set up our business as an LLC, so we could create a 401K plan for the company then transfer funds from an IRA we had into the 401K plan. Dory set up the 401K plan with an outsourced administrator and then arranged a $50,000 loan to give us the cushion we needed to get our businesses up and running.  If you are in a similar situation, thrust into an opportunity to start your dream business or you have been thinking about how to fund it, you now have access to an easy option within your control.

You as Your Own Venture Capitalist

If you have a 401k, you can borrow from the fund, in the amount of 10% up to fifty-thousand dollars whichever is less.  For most single employee businesses this is plenty of capital.  If you were to go raise capital from friends and family you would spend time and effort to secure the funds that are better spent on the business. The real downside of venture capital isn’t the onerous terms you may receive but the time to raise this money; a fundraising treadmill you find yourself on, a massive joy- sucking distraction.

You can be the venture capitalist and invest in yourself.

How do you do this? I will get into the detail of using an existing 401K from your current employer and how to create one for a new or existing business.  When it comes to the loan, you should write out a term sheet.  This is your personal commitment from the business owner part of you to the investor part of you to make sure you get a return.

The initial terms are the loan repayment plus interest. Next, you should make a minimum threshold commitment of putting money in the 401k after the loan is paid off.  Think of this as if you sold preferred equity or warrants to your 401K which will have an ongoing claim on the profits of the business. Since these contributions can be as high as $72,000 a year and 100% tax-deferred, you have an outstanding investment instrument.

Why this makes sense

  • Low cost of capital–the interest rate is 1% to 2% above the prime rate, you pay the interest back to your 401k investment account.
  • You need not go through a bank approval for a loan or credit check, and your interest rate might end up being lower than what you could get at a bank.
  • You pay yourself back with interest – immediate return on investment!
  • It’s the most efficient tax shelter a small business owner has for a profitable venture.

The Other Advantage Tax Deferral

The reason you’re starting a business is to build a successful company that will one day generate profits.  By using a 401K, you can contribute up to $18,000 a year as salary deferment( an additional $6,000 if you’re 50 years of age or older), meaning you do not pay taxes until the money comes out of the plan.

Your “company” can match funds.  The rules need to be set during the formation of your 401K plan, so discuss with your financial planner.

With liberal company matching and profit sharing in place your company can contribute either $36,000 or up to 100% of your salary whatever is less.  If you had the cash, you could contribute $54,000 a year on a tax-deferred basis.  NOT TAX-FREE. You will pay income tax when you draw on funds, but this should be done after you retire when tax rates are lower.  These types of contributions by yourself and your employer can also be done in SEP plans, however, you cannot borrow from a SEP plan.  That’s the advantage of the 401K.

What You Should Know About Using a 401K Loan

You don’t have to set up a company if your current 401K is with your employer.

If you are employed and have a 401k plan with that employer, you can inquire about taking a loan. Every retirement plan has a document describing the rules.

  • There could be an early payback penalty. If a participant with a loan balance leaves his or her employer, the entire balance of the loan must be paid back — usually immediately or could be considered a distribution from the retirement plan, rather than a loan.

Therefore, if you are starting a business and your objective is to leave a present employer where you have a 401k plan, it might make sense to create your own individual 401k plan and see if your employer plan allows for in-service rollovers.

What if you have an existing business and SEP plans? Talk with your financial planner on converting and rolling over that money into a 401K plan to set up the new company.  It’s a great way to consolidate, remember that your financial advisor can construct just about any investment strategy to match your risk tolerance.

Planning and Examples

If you will quit your job and rollover the 401k into a new business, there are costs associated with this process that you will need to build into your plan. There are fees to set up the company, figure on $200 to $ 500 (learn more about incorporating here).  Then there is the plan cost $125-$200 a year to administer your company 401K plan.  You can discuss this with your financial planner or if you don’t have one and have questions please reach out to Dory.

Some Examples

New Business Startup:

This will work for any business startup you might be contemplating.  If you can get the business off the ground for less than fifty thousand dollars, it makes sense to use a loan to buy the tools of the trade and provide working capital while you work to become cash flow positive.  You will have 100% ownership while avoiding spending tons of time raising money from others.  Putting the fund-raising effort into the business will deliver results faster than delays or distraction by fundraising.  The key here is to develop a plan that will get you cash flow positive on the loan you take out, otherwise you will end up having to go back to the well for more money.

Fulfillment Business:

If you have been thinking about starting a fulfillment business on Amazon, a 401K loan is a good way to get the capital to source your inventory and have the working capital to get through startup.  Most overseas suppliers require a deposit and the larger quantity of product you order, the lower your unit price is.  Given that FBA (fulfillment by Amazon) does everything else, you can run a large operation with little overhead.

Independent Publisher:

You want to write full-time.  One way to do this is plan out leaving your day job, using your loan for living expenses and coverage for free time to finish your book series.  You will need a solid plan to receive revenue levels you need – the 401K loan fills the gap.  Maybe you are not prepared to go full-time but want to do your book launch right by using an editor, book cover designers, and have a marketing budget.  This could add up to $3,000 – $5,000.


If this sounds like a road map to your dream of self-employment or full-time writing keep this in mind:

Plan first! Given the risk you’re taking, your plan should deliver a return that exceeds the performance of the S&P 500 by at least by fifty percent. If you can’t do as good as the S&P 500 the best place for your money is to remain invested in the market.

You should be able to pay back the loan with an understanding that in the beginning, you may use the proceeds to pay back the loan while you get started.  Any funds not paid back will be treated as a distribution and you will pay income tax and an early withdrawal penalty.

How To Steps

Step 1: Make a plan

Write up a one-page plan with numbers outlining the uses of the funds.  If this is an exit strategy from a day job, you need to account for living expenses including loan repayment for three to six months.  A good rule of thumb to follow: consider what sum is needed to make the money you need, and double it.

If this money is to fund the business, then create a cash flow for the business.  If you are unsure how to this check out Business Owner’s Compendium.

Step 2: Review your plan and the 401K Plan

Review the 401K plan with HR, get a copy of the plan documents and understand how the rollover process works.  You want to ensure that if you quit, you know the repayment policy and your vesting schedule for profit sharing.  Most plans no longer have vesting, but if yours does then make sure you know when your money vests.   Waiting a few months may be the difference in thousands of dollars.

Step 3: Patience

Prior to rolling over to a new company you need to set up that company and establish a plan.  This will take longer than just setting up a typical LLC or S Corp and establishing an EIN.  Once the plan is in place the funds can move, and the loan issued.  Having patience is helpful in getting the parts in place for a successful exit.

This is not a one size fits all solution.  It made sense for me and has worked well to date.  If this sounds like something you want to do, meet with a financial planner.

You may have a trusted advisor already and all you need to do is share with them what you are thinking about.  They may not have suggested this option if they did n’t know your plan to start a new business and therefore suggested fewer complex strategies delivering the savings plan you need at the lowest cost.

Joe Solari is an Author and Business Consultant.

Authors can learn more at the Business of Writing

Or from his book “The Business Owner’s Compendium”