Article
July 7, 2026
By Erin Lowry
It would be wonderful if authors only needed to focus on writing and never had to worry about the practicalities of running a business. Unfortunately, that’s not the way it works.
Your writing career is a business. And as it grows, you’ll likely face a question that has no simple rule-of-thumb answer: Does it make sense to formalize that business as an LLC or S-Corporation?
The answer depends on two distinct questions—one about liability, and one about taxes—and authors often conflate them. Understanding which one actually applies to you is the first step.
The most important thing to know upfront: An LLC won’t protect you from lawsuits the way people often assume. As an author, you would likely still be named as an individual in any claim for copyright infringement or libel. Having an LLC or corporation in front of you hasn’t been found to provide meaningful deflection. A more practical fix is media liability insurance—ask your publisher whether you can be added to its policy as an additional insured.
Where an LLC does provide real protection is for authors who offer services: ghostwriting, editing, and works made for hire. If you’re a novelist who only publishes your own work, an LLC offers limited practical protection. But if you take on those kinds of engagements, they’re built on contracts—and a well-structured contract can limit what you’re on the hook for if something goes wrong.
Here’s a concrete example: Say you’re hired to ghostwrite a business executive’s memoir. The book comes out, and a former colleague named in it sues for defamation. Who’s responsible? If your contract specifies that the client vouched for the accuracy of everything they told you, and that they’ll cover any legal claims arising from that content, you’re in a very different position than if you’d signed informally with no such language. That’s what indemnification means in plain terms: If a claim comes from your client’s side of the work, they’re the ones defending it, not you. For work-made-for-hire projects especially, the client should be indemnifying you—and your liability, if something does go sideways, should be capped at the amount you were paid for the project, not unlimited damages.
Operating through an LLC reinforces this structure. It signals that you’re running a professional service business, makes contract enforcement cleaner, and adds a layer of separation between a dispute and your personal finances.
For authors with more than one distinct line of work—say, you publish your own fiction and also run a ghostwriting practice—it can make sense to keep them in separate LLCs. If a ghostwriting client sues your services LLC, they can’t go after the royalty income sitting in your publishing LLC. Without that separation, everything you own under the same entity is potentially in play. Think of it as not keeping all your eggs in one basket, but legally enforced.
What Is an LLC?
An LLC is considered a corporate person—legally separate from you as a natural person. To form one, you file formation documents with your state, establish an operating agreement, and handle annual or biannual filings. You’ll also apply for an Employer Identification Number (EIN) through the IRS and open a separate bank account. Critically, you must maintain that separation: Money that flows into the company can’t be spent on personal expenses. Blurring that line could undermine your ability to claim limited liability in a dispute.
From a pure tax perspective, forming an LLC doesn’t actually save you money. A single-member LLC is treated as a disregarded entity—you’d still file a Schedule C, exactly as you would as a sole proprietor. Authors typically form LLCs for legal reasons, on the advice of an attorney, not for tax benefits.
Tax savings come into play with an S-Corporation—but the LLC and S-Corp aren’t two versions of the same thing. They operate on different logic, and you can actually elect S-Corp status on top of an LLC; you don’t have to choose between them.
An LLC is primarily a legal structure. As far as the IRS is concerned, a single-member LLC is essentially invisible—your taxes work exactly the same as if the LLC didn’t exist, and you pay self-employment tax (currently 15.3 percent) on everything you earn. An S-Corporation is primarily a tax structure. What changes is how your income gets treated: Instead of all your earnings flowing through as self-employment income, you split them. You pay yourself a reasonable salary as a W2 employee—and pay payroll taxes on that portion—and then take the rest of your profit as distributions, which are not subject to self-employment tax. On a high enough income, that difference is substantial.
The catch is that running an S-Corp costs more. You’re looking at higher accountant fees because corporate tax returns are more complex, payroll processing costs because you’re now a W2 employee of your own company, and potentially higher state fees and compliance costs. In practical terms, the added overhead might run somewhere in the range of $2,000–$5,000 or more per year depending on your state and your accountant.
The savings come from not paying self-employment tax on your distributions—but if your income isn’t high enough, those savings don’t cover the cost of the added complexity. You’ll hear different rules of thumb: $100,000, $250,000, $500,000. According to Robert Pesce, the late, longtime accountant and treasurer of the Authors Guild Foundation, the benefits clearly outweigh the costs when an author knows they’ll be earning at least $400,000 a year, now and for the foreseeable future. Earning less doesn’t rule it out entirely—an S-Corporation also makes you a W2 employee of your own company, which can simplify other parts of your financial life, like applying for a mortgage. But it’s a multifaceted decision, and a CPA is the right person to run your actual numbers.
Authors should also be aware that classifying yourself as an employee of an S-Corporation can negatively impact your statutory right to recapture copyrights transferred to your publisher. The Guild has written about that issue here.
Health insurance and retirement plans like the SEP IRA are available to you regardless of whether you have an LLC or an S-Corporation. Your entity structure doesn’t determine your access to those. A more practical fix is media liability insurance—though it’s not always easy to obtain. Ask your publisher whether you can be added to its policy as an additional insured.
Ultimately, there is no universal answer here. The right structure depends on the nature of your work, your income, your risk exposure, and your long-term financial picture. Consulting both an attorney and a CPA — separately, for what each does best — is the most reliable way to figure out what makes sense for you.
Erin Lowry is the author of the four-part Broke Millennial series, including Broke Millennial, Broke Millennial Takes On Investing, Broke Millennial Talks Money, and the Broke Millennial Workbook. Erin has written for The New York Times, Marie Claire, and been a columnist for Bloomberg Opinion. She writes two newsletters: Hopefully Helpful and My Name Isn’t Mom.
