Q&A: What are the tax advantages and disadvantages of a textbook author setting up an incorporation rather than operating as a ‘sole proprietor’?

Q: “What are the tax advantages and disadvantages of a textbook author setting up an incorporation rather than operating as a ‘sole proprietor’?”

A: Stan Gibilisco, author of several textbooks including Geometry Demystified:

“I tried this when I lived in Hawaii and discovered, to my horror, that my royalty income was subject not only to their income tax, but to their ‘sales’ tax as well (they call it a general excise tax). I figured that if I formed a Nevada corporation and had all my income channeled into it, and then became an employee of that corporation, the royalty income would not be subject to that onerous tax. It was a beautiful theory, but, like so many theories, did not work. The legislators in Hawaii had thought of that before I did and the law was airtight. Love it or leave it. I left. [Read more…]