: What are the advantages of incorporation for a writer? I have heard of some (rather successful) writers incorporating - that is, creating a corporation of which they are the sole member. What

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It's usually about taxes and protecting your assets. A corporation is a person under the law, so it can be sued and can defend itself and pays it's own taxes. If you set up a corporation, you become an employee of your corporation and it pays you a salary. It also pays the gov't a share of your employment taxes.

One way to get the benefit of asset protection, without the hassles of paperwork requirements that come with corporations, is to form an LLC, or limited liability company. The IRS will, if you tell it to, treat your LLC as a "disregarded entity" -- which means you are taxed as though you're a sole proprietor, report your business income and expense on schedule C but still get the legal protections that come with having an LLC. The IRS will, also, at your request, treat the LLC more like a corporation.

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Not sure how much the insurance thing applies outside of California, although that would be an important consideration there.

Otherwise, keep in mind that corporations are subject to a different tax structure and are harder to setup than other forms of incorporation including limited liability companies, or LLCs, which offer the same liability protection as a corporation.

Also, you will want to have some form of business organization, even if it is just a sole proprietorship, so that you can use a tax ID number for reporting purposes. Otherwise, you have to give out your social security number to everyone you earn more than 0 from.

I wrote up a thing about it in more detail on one of my sites a while back. (Hopefully linking via the word "thing" keeps anyone from freaking out about it being some sneaky SEO trick.)

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Officially, the reason to incorporate is to protect your personal assets if someone decides to sue you over your writing. If you're incorporated, they would instead have to sue the corporation, and your personal property can't be touched.

My own reason for incorporating was to get access to only-somewhat-ridiculously-priced health insurance. Buying health insurance is a pita if you're self-employed. In California, though, corporations (with two or more employees) are what's called “guaranteed issue”—i.e., insurance companies have to offer you a plan. The two employees of the corporation just happen to be my husband & myself, allowing us access to insurance options we couldn't otherwise get.

There are also some advantages in terms of non-fiction writing opportunities. Corporations these days are very leery of hiring freelancers who might appear to be employees, and they're more likely to hire you if they can pay a corporation.

For an individual who writes fiction and doesn't have serious assets? I'm not sure what advantages there would be, if any.

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