LLCs to Protect Yourself - from what?

Things are moving slow regarding the house fire.  No real news to report.

So I'm going back to blogging about the publishing schemers.  Should you form a Limited Liability Corporation (LLC) as an author? 

Before I jump into the scheme, I will say that anyone can sue anyone in the United States for any reason.  So if based on that, I guess it wouldn't hurt except that LLCs aren't free.  I'm not overly concerned that someone will sue based on my fiction writing since I'm definitely sure I wrote it, have backup files, posted info about it during National Novel Writing months, went to writing groups, and from there it'll be a tough case to prove otherwise.  And what would they hope to gain, my royalties?  Plus their court costs?   Not a good get-rich-quick scheme.   Damages?  How does a fictional novel damage someone?  I even googled Vanna's name to make sure there weren't a bunch of Vanna Ames around.  There wasn't even a historic figure named Neferseshotep.

However, the real scheme (according to the schemers) is to use other work that you wouldn't legally be able to use and hide behind the LLC when it's found out.   That doesn't sound pleasant, but they were using as an example Broken Piano for President by Patrick Wensink.  I've actually blogged about Wensink's blog on Salon so when this scheme was floated at a dubious writing group, I knew exactly the book and author.   I don't think Wensink or his publisher started out with the intention of receiving an extremely polite cease-and-desist letter from Jack Daniels that they publicized because it was one of the nicest cease-and-desists ever.  Wensink admitted he made $12,000 in that six month royalty period because his book then became a bestseller so in Sharon terms this is also not a good get-rich-quick scheme.  I have imagination and like to think in terms of Powerball jackpot figures, rather than being able to cover a tuition bill.

But to the scheme -
(1) Set up a LLC. 
(2) Obtain a novel, search and replace names and insert products from chosen title.  The idea floated was similar to Marlboros and Budweisers. 
(3) The LLC publishes the novel.
(4) The LLC collects the royalties.
(5) The LLC pays every cent it receives to the schemer.
(6) Repeat steps 2-5.
(7) The LLC has no money when it is sued by the authors or trademark holders.

First off, I don't think this is very good for someone who claims to be an author.  Ideas should be popping up in your brain all the time so you don't have to manipulate someone else's text and slap your name on it.

Secondly and probably more importantly in legal terms, a LLC cannot be used to avoid personal liability.  Since I'm not a lawyer, I'll point you to Maxwell S. Kennerly, Esquire's post.

Basically, you can't set up a LLC to avoid taking responsibility for your wrongdoing.  Let's say I have my LLC and a teenager.  I register her car to the LLC.  When she drives through a red light, and a camera takes a picture, the ticket will be issued to the owner of the car - LLC.   Do you think I can say LLC has no money, and write ROTFLMAO across the summons? 

Use ISBN - International Standard Book Number

Please excuse this longish post.  

And a preceding caveat that we can ignore for this discussion - Kindle format books only need an Amazon number or ASIN.

So much gets said about ISBN – international standard book number or that barcode on the back of the book they scan at the bookstore.  I believe the worst piece of self-publishing, business advice I heard is don’t get an ISBN for any of your published work. 

There’s various scenarios where you might choose one route over another to become published and possibly obtain an ISBN, but this individual was going full ‘tin foil hat’ so that’s why I found her series of comments so disturbing.

I think this applies to United States only – you can take that to mean only here will you hear this and will there be people listening, if you like.

From the trolling well of misinformation -

If your book is ever branded with an ISBN, the government will know every book sold and at what price and come after you for taxes because Bowker (the sole source of US ISBNs) is a government agency that’s part of the IRS.

I think she should have added the word ‘secretly’ because most Bowker employees have no idea they work for the IRS (that’s me being sarcastic – Bowker is not part of the IRS), or somehow collate book sales along with information regarding what is the net income to each author for tax purposes.  Authors are taxed on their income, not the cover price of their books.

Besides the illogic of this scenario, I’m concerned about the author who may take this as true (if not paying taxes on income is their primary concern when they self-publish their book).  Without an ISBN, where will this book be sold - out of the trunk of your car?   I expect the ‘off the grid’ style will radically decrease sales, if there were ever going to be any.  Is it worth not paying income tax to do this?  If the answer’s ‘Hell, yes!’ read on …

More how-to advice from the same troll when an author questioned what to do if a printer insists they want to put a ISBN on the back cover of the book –

Check with local printers.  Do not use large book printers such as CreateSpace.   Ask the printer for a barcode free cover.  If they are insistent, supply a false one.  Local printers may not verify for accuracy.

Should I be worried that my ISBN will be supplied to mask some hot-selling, off-the-grid novel, and the Bowker division of the IRS will be after my ass?

I have not priced out how much the difference is between using a Print On Demand (POD) company such as CreateSpace (owned by Amazon) is compared to a local printer.  However, I do know other authors who are under contract to smaller publishing houses and their books are printed by CreateSpace.  To me, that means that CreateSpace offers competitive printing rates.

Tying this back to the original premise, what if the author decides the local printer is too much money per copy, and s/he uses CreateSpace?  There will be an ISBN assigned to that book.  CreateSpace offers them at no charge for using their service.

This could put the tin-foil hat crowd back into a tailspin because that seems deceptive – nothing worth having is ever free.  Within Bowker’s web site, there is pricing for ISBNs.  Bulk pricing lists 1,000 ISBNs for $1,000, contact for ISBNs in greater quantity.  So let’s say CreateSpace paid at most $1 for each ISBN they give away for free – doesn’t that mean Amazon will go out of business? 

It is true that currently you never have to buy a copy of your own book through CreateSpace which equals no revenue for CS/Amazon.  Authors can also not choose any distribution options (it’s not even for sale on Amazon).  How many people are doing that?  I think CS/Amazon has thought it out and finds $1 an acceptable risk for gaining the possible business.  As long as some authors buy copies of their books, sell their title through Amazon, or purchase other services through CreateSpace, they’ll make those dollars back.

For those interested in eBook publishing, SmashWords has a similar offer.   A free ISBN to cover the eBook distribution you choose (Smashwords distributes to multiple eBook platforms).  Don’t mix up the ISBNs.  You need one for each format – hardcover, trade paperback, eBook, audio, etc.

There’s more advice on ISBNs that I might not call as ‘tin foil hat’, but more about keeping it a secret that you’re a self-published or indie author, or the current term ‘artisan author’. 

Remember Big Brother over at Bowker?  He only talks to whoever bought the ISBN.  That’s Bowker’s customer and the ISBN owner of record. Anyone researching that ISBN or your title will find out who Bowker’s customer/your publisher is.  If they see ‘Create Space’ or ‘Amazon Digital’ instead of ‘Random House’, your secret is out of the bag.

So the bigger thinking entrepreneurs will set up a company name, or better yet a Limited Liability Corporation (LLC) to be their publisher, even if they will be the only author for the publisher they own.  When they go to a service like CreateSpace, Lightning Source, or Smashwords, they will supply the ISBN they bought directly from Bowker. 

Confusing?  Let’s say I started a business with my blog name and called it Crazy Cat Publishing. I then go to Bowker and pay for a block of ISBNs (remember one for each format, and I plan to have multiple titles so I might as well buy them now for the best group price).  I decide to use CreateSpace for POD (print on demand) and supply them with an ISBN that Crazy Cat Publishing (me) purchased from Bowker.  When my book is listed in Books in Print or anywhere else, it will say it was published by Crazy Cat Publishing.  CreateSpace was hired by Crazy Cat Publishing as a printer.  

Is that deceiving the consumer?  I am aware of factors because I am an author, but as a reader, I might not care who the publisher is unless I find a quality factor – either good or bad.  I do get a bit short with my book reviews if I know the book is traditionally published and is edited poorly in terms of development, plot, and basic copy editing.  However, even if it’s self-published, I do have some expectation with regards to professional quality.

Since I started with the worry of taxes, I can give a brief amount of info on how it works for self-publishing.  Amazon (as CreateSpace or Kindle Direct) and others will ask for your SSN, or if you set up a company like Crazy Cat Publishing, its tax number.  You get emails about your royalties, probably choose to get them direct deposited, and then sometime in January each seller/distributor will mail you or your company a 1099MISC.  That’s income.

If you decide to be an off the grid author as originally suggested as the best way to do things by the troll poster, you would not have author income so I think that eliminates deducting author expenses.

So my conclusion would be get and use an ISBN, even if you feel more comfortable setting up an alias company for yourself and buying it directly from Bowker rather than accepting a free one.  An ISBN allows that particular format of your book to be sold through bookstores and carried by distributors.  Those sellers will pay royalties and that is your income.  

Poor Man's Copyright

With starting the new day job, I’ve got a new schedule.  I’m old and resistant to change so author  blogging hasn’t topped my ‘to do’ list, but obviously I need to get back to this.  

In the past month, I’ve been revisiting some of my previous sources of publishing information because the landscape changes quickly these days.  The comments left as helpful advice may not always reflect the best intentions (back to my disgust with trolling – someone’s at this site for advice, so a troll purposely gives false or misleading information).

So perhaps I can write a blog series debunking some of the more extreme or most hindering advice?

Today’s post will be about ‘Poor Man’s Copyright’ and I’m only referring to the United States with suggestions though probably other countries have their own laws and method to register copyrights. 

This myth has been around a long time (pre-email days), and it’s never been easier to copyright so why someone would still find this alternate method believable and also legitimate is baffling.  However, this idea certainly has legs. 

According to the Poor Man’s Copyright, all an author needs to do is print out their manuscript, stick it in an envelope, and mail it to themselves.  If they never open this postmarked envelope until it is time to defend their creative rights in court, it is proof that the author wrote it and here’s a copy time-stamped by the post office.

Sounds simple, but here’s the flaws –

·         Court cases are not won this way because you could have mailed yourself empty envelopes and filled any one with paper later, or backdated your computer to burn a disc with a date two days before your postmarked envelope.

·         The US Copyright Office does not recognize this as a substitution for registration.

If that’s not how it’s done, how do you copyright your work?

·         Thanks to The Copyright Act of 1976 , your work is under copyright the moment it is created and fixed in a tangible form which could be printed on paper or on a hard drive and read  with the aid of a device such as a computer.

·         If you want to voluntarily register your copyright because registered works may be used for litigation, in case you have some difficulty later and want to go after statutory damages and attorney’s fees.   Register electronically at http://www.copyright.gov/eco/ and the current fee is $35. 

I work in IT and am not an attorney, but Snopes even says Poor Man's Copyright is not helpful in the United States, but does mention it 'may be useful' in the U.K. 

Traditional Publishing and Non-Fiction

I sometimes enroll in a course at Coursera.  It’s free and online, and they’re taught by experts in their fields from recognized schools.

Currently I am taking Surviving Disruptive Technologies taught by Hank Lucas from the Robert H. Smith School of Business, University of Maryland.  The course is nice and understandable so that’s why I’m still with it weeks after its start date.  (If you start a course and find it’s not your cup of tea, it’s simple to unenroll.  No one is going to give you a hard time.)

The course has reached a lesson regarding publishing (it followed newspapers) on how disruptive technology is changing the business.  Prof. Lucas has published non-fiction work and was kind enough to share the numbers.  Like a fiction author, the non-fiction author receives a percent of the net per their contract with their publisher.  He receives the average 15% after net - $50 cover price, he receives $4 for each new book sold.  I’m adding Prof. Lucas receives nothing for the sale of a used textbook.

Here’s where publishers may have competition from self-publishing if authors think along the same lines as Prof. Lucas.  The author provides the content – the intellectual property.  He also provided the interior drawings and illustrations, something publishers used to do.  Is the value of his content roughly 8% of the finished product, or should the author receive more?  Prof. Lucas did include in his lecture that freelance editors and peer reviews are available for hire outside of traditional publishers – hence, he would need to invest money into the project like other self-published authors.

Obviously, Prof. Lucas has a promotional advantage over some self-published authors.  He can assign the book as part of his in-person course at his college, or teach a MOOC (massive open online course) at Coursera to get his name in front of eyeballs interested in the topic that his book(s) also covers.  

At least IT contracts don't have stream of consciousness

I was tickled by Matt Haig's piece on the Telegraph web site - 30 Things that every Writer should know.  There is a lot of good things in that list that even aspiring-to-become-professional authors should take to heart.

Your book advance amount does not predict success or even the level of support that an author will receive from their publisher stood out, along with - There is no modernist stream-of-consciousness novel harder to get through than a 'Publisher-Author Agreement'.

Bestselling Authors do not make Big Bucks

I've been doing research to better understand traditional publishing contracts and payments so I will be well-versed in the math to assist other authors in making a decision regarding traditional versus self-publishing.  And with the rapid changes in publishing, to understand some of the complexity.

For example, we're aware of Amazon.  Amazon is more than a book and everything else online store and distribution powerhouse.  Amazon also has both flavors of publishing under its octopus of a corporation.

There's CreateSpace for print on demand (POD) paper-style books, and also Kindle Direct to distribute ebooks in the Kindle format.  Both of these can be used by self-publishers, but it is not unusual for a small publisher to have their printing performed by CreateSpace.  CreateSpace is offering a cost-effective solution to their company.  Amazon also has imprints which operate with a traditional publishing model - authors receive contracts, advances, and royalties.

So while I was on Facebook and someone posted a link to 'Hey Amazon, where's my money?', I clicked to read the article on Salon.  I sell books on Amazon, and I have read some previous articles and blog posts that sounded like Amazon was letting some authors down.  They were short on specifics or contradicted my personal experience.  Such as if someone says they're going to Amazon today and will buy your book, and by the next day you don't see the sale - Amazon must have cheated you of that sale, rather than the acquaintance never following through.

I loved the Salon post by Patrick Wensink, except for the title [which has since been changed to My Amazon Bestseller made me Nothing and there may be more info in the article since I first saw it].  Wensink is not self-published so the publishing numbers and payments from Amazon are delivered to Wensink's publisher.  Wensink's publisher collects all the numbers and payments, then they'll issue a royalty statement and pay Wensink based on his contracted terms.  Even if the publisher is your buddy, they control the business relationship with Amazon or any other distributor.

Last year, Patrick Wensink received a cease and desist letter from Jack Daniels because the cover of his novel Broken Piano for President resembled their distinctive label.  The polite tone of the request made the news and increased sales for Broken Piano for President.  

The Salon post supplies the facts, and I love numbers rather than some hurt feelings and finger pointing.  Wensink's novel climbed into the Amazon top bestseller list for a week.  It sold approximately 4,000 copies during the 6-month royalty period (usually July-Dec), and Wensink received $12,000 (he didn't mention an advance, but we can talk about the $12k).  That's actually a great royalty rate, without any of us knowing the specific contract terms with respect to printed on paper copies and eBook sales.  

To validate those sales numbers, it's estimated it takes roughly 500 sales in a day to break into Amazon's top bestseller list.  Wensink doesn't mention other sellers, but I found that a great deal of book sales go through Amazon because the shelf life of a book in a brick-and-mortar store averages six weeks, without automatic reorder if the title sells out.

And Wensink's post makes a great point - 'I had a bestselling book.  I didn't make a decent wage.'  That's spot on. 

As a little BTW, the book currently only has 22 reviews on Amazon.  Reviews are like hen's teeth.

Watch those words

Even with this time off, I spend more time on finding work than on writing fiction.

The I.T. industry has changed so there are more contractor opportunities than ever, and some can turn into a permanent hire.  Contracting is not ideal, but affords some flexibility - though I prefer stability over flexibility.

There are many contracting firms so I receive frequent calls from companies I haven't heard of before. That's OK though, because they'll tell me about the job, their client, what they'll pay, and how they'll pay it.  If I like what I hear, I'll say 'yes' in some way.  Then they'll send me an email asking me to respond back with my acceptance and giving them the right to exclusively represent me for that single position at that rate at that location.  Some end clients have so many similar job postings that there may even be a position number included - like Verizon Wireless begins their positions with VZW.  If someone else calls me about a job at Verizon Wireless, I need to compare the job numbers so I don't have two different companies represent me for the same position.  That's breaking the rules, but it's alright to have another company represent me on a second job at Verizon or wherever.

So while I was on the phone with my daughter last week, I received a voice mail that Vonage transcribed into text as -

"Hi son, it's him put technologies. I'm just calling to message I will bring them up a plan for the rest of them will and Ashley. I just was in the kitchen. The assistant in New Jersey. If you understood for this person please contact him. My number is 856-.... My extension is 107 I repeat 856-.... My extension is 17. I'm sending regarding this please go through that and get back to me. Think we" 

I then was forced to listen to the wav attachment myself to see if I could figure out the correct extension or the caller's name.  Vonage did the better job.

The guy called again, and his conversation skills hadn't improved.  I was able to get a rate and town, and said send me over the email and I'll confirm.  Some firms will suggest wording, and his did, along with the rate without benefits and the job description.  No name of an end client.

He requested I reply -

'I give' - Company X - 'the right to exclusively represent me.'

What could this mean if I responded with that?  That from this point forward Company X is the only consulting company that can represent me.  If I find my own job even, I could be held liable.  The rate is not in the phrase, so what if they find me a job bussing tables at a diner for minimum wage?  What if it's far away, where I wouldn't want to commute?  Anyway, the email I sent back was not what he expected to receive.

This also applies to author agent contracts. Agents are in the business of selling.  That's good, because they're supposed to represent you as the author.  They sell your work, that's how they get paid.  An agent also has a relationship with publishers (or at least you hope they do).  That business relationship is also important to them, and you as the author are expecting it to remain professional with regards that the agent is working for you in an ethical manner with their connections.

However, sometimes the contract can be loose either through a reluctance to keep updating them for every client, or due to the unknown amount of time it takes to 'sell' your work.  Unlike my contractor situation, your agent should remain your sole agent to all publishers for a period of time to sell either all your work, or a specific work.  Agent Joe is not limited to pitching you to Penguin, so don't worry about getting Agent John to represent you to McGraw-Hill.

What you do want is some escape clauses that are not draconian sounding.  What if Agent Joe has a life-changing event, and no longer actively represents you to publishers?  Wording such as if a publishing contract has not been signed one year from this date, you have the option to dissolve your relationship with Agent Joe with a notification such as you or Joe mail the other a certified letter.  You don't even have to go into whose fault that is - your work may be a difficult sell, Agent Joe may not be presenting it properly, or Agent Joe's publisher relationships are not the right publishers for your work. Give Agent Joe some benefit of doubt because he's not paid until you're sold, so doing nothing except getting you to initially sign is bad for his business too.

Authors can't just write - they need to read too.