Running A Writing Business
One of the best things about being a writer is that it’s very easy to set up. You can get started right now. You don’t need premises, stock, nor capital. You need very little to get started apart from your own ambition, drive and enthusiasm. You can easily operate part time alongside another job or business if you wish since you don’t necessarily need to staff your ‘office’ during the day.
Although one of the great advantages of writing is that it’s low maintenance don’t forget that it is still a business. So, you need to deal with all the usual business admin. properly and present a professional image to your customers, readers and other contacts. Here are some points you need to consider :
First some good news! You don’t need a general business licence in the UK, nor do you need any sort of licence or official permission to start up.
Setting Up Your Office
This is the ideal home-office occupation. But aim to set aside a little space to use an as office. A spare bedroom is ideal; if not a corner of a larger room.
If you’re not available during the day (perhaps you have another job) always set up voicemail on your phone. Return any business calls as soon as possible – just in case it’s a new customer or editor.
You’ll need a PC or laptop and Internet connection for this business. If buying a new one or upgrading it’s sensible to buy the best one you can afford so that it can cope with any new technology that comes along.
Choosing A Name
You don’t need a business name for a writing business. It’s easier and better to use your own personal name.
However, if the name you use isn’t your own name then it’s a legal requirement to quote your own name on business documents such as contracts and invoices. Simply stating ‘Proprietor : John Smith’ (or whatever) will satisfy this particular law.
Setting Up A Company
Even though your writing business might be a part time or sideline business it is important to set up your enterprise as a proper business, using one of the three standard business formats, which are :
1. Sole Trader
A sole trader is the simplest type of business and consists of one person trading on their own account. A sole trader has complete control of their business, and no other person has a say in what they do. They also keep the profits for themselves. They do, however, bear all the risk and are personally liable for any losses they might incur.
A sole trader enterprise is attractive because it costs virtually nothing to set up and is simple to operate. It’s probably the best option for a writing business.
You don’t need to register a sole trader business.
A partnership consists of two or more people trading together. Partners working in a business have an equal say in decision making. They also share any losses equally, unless they are nominated as limited partners who have limited liability but who cannot be involved in the management of the business.
A partnership should always have a partnership agreement.
3. Private Limited Company
A company is a ‘person’ in its own right. It can own property in its own name. It can sue or be sued. Most importantly, in the event of any loss or bankruptcy, the shareholders in a limited company are only liable for a limited amount of any debts (normally a token £100). So, forming a limited liability company is a very good way of protecting yourself from financial loss in the unlikely event that anything goes wrong.
A company is also responsible for its own tax and, currently, benefits from certain tax advantages so that you could pay less tax overall by running your business through a company. If this option appeals it would be a good idea to take expert financial advice on this first.
Companies can be formed through an accountant or a company formation agent. All limited companies must have at least one director. Directors do not have to be shareholders, but usually are. The directors form a board to run the company and can act as they see fit, although shareholders can remove them at the AGM or other occasions if they so wish. The person who owns the majority of the shares effectively controls a limited company.
Finally, note that limited companies must prepare annual accounts and file them with the Registrar of Companies. Your company will also be liable for Corporation Tax (CT) on its profits.
Employing Other People
One of the advantages about a writing business is that you probably won’t need any permanent staff, at least when you first start. This business is ideal as a one-man or one-woman band. You can do everything that the business involves yourself, even without any previous experience or qualifications.
However, there are situations where you can employ part or even full time staff to do some of the work for you if you wish. For example, editing or proofreading, or book marketing.
The interesting thing to note is that it can often be much more cost effective to pay part time office staff the current minimum wage to do routine duties than to do them yourself. Even better, you won’t necessarily need to provide them with an office as many of these jobs can be done from their own homes.
What You Need To Know About Tax
When you start your own business (a writing business or any other business) you should notify HM Revenue & Customs. Contact the Newly Self-Employed Helpline to register : Tel. 0845 915 4515. Website : www.hmrc.gov.uk.
They will require you to complete a tax return each year, which can be done online, detailing your business income and expenses. You will, of course, have to pay income tax on your profits (or Corporation Tax if you are a company).
However, you can also claim all your legitimate business expenses against tax. These can reduce your taxable income considerably so you should ensure that you claim them all.
These tax deductible expenses include advertising and marketing, business travel, telephone calls, Internet connection costs, printing and stationery and the costs of computer and other office equipment – claimed as what is known as a ‘capital allowance’. If you use your own car in business, or run an office at home, you can also claim a proportion of your motor expenses and home expenses.
As soon as your turnover reaches the current registration limit (you can find out what this is by checking with the HM Revenue & Customs VAT office) you will need to register for Value Added Tax (VAT). This will mean you’ll need to charge it at the appropriate rate on all your sales. But you will also be able to reclaim the VAT you pay on any goods and services you buy in your business.
Contact HM Revenue & Customs VAT National Advice Service for more details : Tel. 0845 010 9000. Website : www.hmrc.gov.uk. You will need to complete a VAT return
which can be done online – showing your sales and purchases and VAT collected and paid once every three months.
Banking For Your Business
Ideally you will need a separate business bank account for your writing business. Don’t use your own personal bank account for business. Apart from looking more professional it will allow you to keep your business money separate from your own personal money. Some banks offer a fee-free period for new small business accounts, so shop around and see who is currently offering the best deal.
Basic Book Keeping
Every business should keep financial records. This is a legal requirement and also will help with the management of your business. However, for writers book keeping is fairly straightforward. You can do this using any computerised book keeping program if you have a PC or, if not, by keeping written records on paper.
There are just three sets of records you need to keep:
1. A record of all your sales, ie. writing sold to customers, or advances and royalties received,
2. A record of all your business expenses, ie. every item or service you buy for your business.
3. A record of wages paid to any staff, including any money paid to yourself.
Public Lending Right
Public Lending Right (PLR) is the right for authors to receive payment under PLR legislation for the loans of their books by public libraries. The Government makes a sum of money available every year to pay PLR.
You can register for PLR payments as soon as your first book is published, no matter how small. You can get more details here: www.plr.uk.com
Authors Licensing & Collecting
ALCS – or the Authors’ Licensing and Collecting Society Limited to give it its proper name – is an organisation which collects money due to members for secondary uses of their work. These include such things as photocopying, cable retransmission in the UK and overseas, digital reproduction, educational recording and repeat use via the Internet.
To receive a share of these fees, assuming your work qualifies, you need to register your personal details and details of articles you have publish with ALCS. Their website is here: www.alcs.co.uk
Note: The legal, tax, PLR and ALCS information in this report refers only to writers based in the UK.