My Miniature Corporate Empire
This post is mostly for posterity so I don't forget why and when I did this stuff. If you find small-scale business stuff interesting you'll like it.
When I initially published my first book Mastering Modern Payments in 2013 I just did it myself, with no business backing it. I had a separate personal checking account where the Stripe deposits ended up, I deducted business expenses, and everything was peachy. Then I got a not-insignificant consulting gig and I decided it was time to get a bit more professional.
The Birth of a Giraffid
In March of 2014 I set up Okapi LLC (because okapi have stripes, get it? ha ha). Okapi became my central clearinghouse of everything business-y. Consulting payments and Stripe deposits came into it's business checking account and cash came out. Later my accountant advised me to elect S-corp taxation, which ended up saving us a boatload of taxes even though it cost a bit more to run. Consulting became my full time thing in September 2014 with steady payments from book sales supplementing our household income.
When my wife and I found out we were having a baby in late 2015 I got really into planning our family's future, including things like estate planning. Super-nerd levels of obsession.
One of the things that I was very concerned about was what would happen to the IP that I create when I die. Our estate planning attorney suggested that I sign it all over to Okapi but that made me uncomfortable. What would happen if a client sued Okapi and won a judgement over my insurance limits? They'd be able to get access to all of the IP that I worked so hard to create!
Okapi Spawns a Sibling
After talking things over with a handful of lawyers and my accountant I decided that the best solution to this (extremely paranoid) worry was to split publishing and IP holding off into a separate business. We named it Cora Street Press LLC, after the first street that my wife and I lived on together.
Cora Street Press is a bit different. Instead of just me owning Okapi, my wife and I own Cora as "tenants by the entireties", which is similar to owning a checking account jointly with someone else, with some additional state-specific benefits. It's also a manager-managed LLC, where I'm the manager and my wife is the backup.
Cora functioned well for half of 2016 and into 2017 when book sales started to finally slow down and overhead started becoming a big deal. It doesn't cost a lot of money to run an S-corp but it's definitely not free. Those costs quickly became a big portion of Cora's revenue.
Cora Adopts a Child
Cora and Okapi are both S-corps so my initial thought was to just drop Cora's S-corp status to eliminate some overhead, but there are hard deadlines for that set by the IRS. You can't just elect and drop S-corp taxation willy nilly because that would a nifty way to cheat on taxes. It also wouldn't drop much overhead because we'd still have to have Cora's taxes prepared as a partnership.
Here's where it gets weird.
It turns out that the easiest way to cut down on overhead while preserving the huge benefits of keeping consulting and publishing separate would be to make Okapi a subsidiary of Cora. That way I only have to run one payroll each month instead of two, and the tax preparation costs are much less because we're only filing one S-corp return instead of two.
The process was actually really easy. I filled out a little form that assigned my personal Okapi LLC interest to Cora and then filed another form with the IRS that told them about the subsidiary relationship. Technically Okapi is now a Qualified S-Corp Subsidiary.
Day to Day
The day to day operations of these two busineses didn't change a whole lot. We do the bookkeeping separately but now most of the money flows from Okapi's bank account up into Cora's. We run payroll, pay for health insurance, and make 401K deposits all out of Cora's account now.
The biggest change is that I worry less. Future publishing will just happen through the top-level business, consulting and other "hot" liability things happen through Okapi, and future weird things can happen as additional disregarded LLC subsidiaries. Cora is now the lynchpin holding company of my little business empire.