Tax tips: Should textbook authors form a corporation?

Q: “I’d like some feedback on the idea of a textbook author incorporating in some fashion, rather than operating as a ‘sole proprietor.’ What are the advantages and disadvantages of incorporation? What are the tax advantages and disadvantages?”

A: Stan Gibilisco, TAA Member

“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…]