Before I go any further I have to say that I am not a lawyer nor an accountant (CPA) and that such professionals should always be consulted when addressing questions like this.
With that disclaimer out of the way…
I’ve elected to answer this question by referring you to an article by a CPA who explains the different types of corporations, the benefits and drawbacks of each, and offers examples of when it is a good time to form an LLC-or other entities like partnerships or corporations-and when it is not necessary. (Gotta love how I dodged that one!)
In short, Riley explains that most artists-including authors-don’t need to set up a formal entity of any kind. However, if there is a chance that any of the publication’s information may inspire a lawsuit, the author may be interested in setting up a formal entity. Please refer to his blog for more information. You can also request a phone consultation with the CPA for more detailed information.
If your goal is to protect your personal assets, insurance is another alternative to setting up a formal entity. Click here to learn the answer to “Do writers need insurance on a self-published book?”
What other legal questions do you have about becoming a traditionally or self-published author?