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Costs of Creating a Publishing Company to Self-Publish Your First Book

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Hello everyone welcome back to Cloud
Kitten Chronicles. I’m Joshua and today we’re going to be talking about
self-publishing, creating a publishing company, and everything in between. This
was a video recommended by one of our kittens in the kitten coalition, our
Patreon. You can check that out over here. This was a suggestion from one of our patrons Courteney Levit.
Courteney wanted to know a little bit more about our publishing company, Cloud
Kitten Publishing, what it took to get off the ground, why we started one in the
first place, and if it makes sense for authors to even start a publishing
company or to just publish their book themselves. When you finished writing a
book this can actually be a really confusing thing to try to figure out how
to do because everybody has different opinions. So I thought it would be good
idea to lay down some information that we found out and give you our reason for
starting a publishing company and why you might not necessarily want to do
that. Now before I start talking about all that stuff I wanted to say I’m not a
lawyer. If you want to get actual lawyer advice you should go and pay for an
actual lawyer. All the laws and regulations and stuff that I’m going to
be talking about are specific to the US. And to start off by saying that a
publishing company is a business. It’s not just something that you write down on a
piece of paper saying “hey I’m a publishing company now” There’s a lot of
regulation and paperwork and legaly stuff that you’re gonna have to worry
about if you start a publishing company. Make sure that even after you listen to
this video that you actually sit down and put a lot of thought into whether
you want to get into that whole mess. Cloud Kitten Publishing specifically is a
DBA or doing business as. It’s a name that our actual LLC is legally allowed
to use so our actual LLC name is Eclectic Wolf LLC. We decided to do that
in the beginning because we wanted to make sure that we structured our
company such that if we decided to do anything else in the future that we
wouldn’t have to re-set up an entire company. We could just use the one that
we already had. Eclectic Wolf LLC is registered under the US government
stationed in the state of California. So I think when you actually finished your
book and you’ve decided that you actually want to go on the throw it out
into the world. You kind of have three options. Your first one is that you
published the book as yourself the author. You don’t have any type of
company it’s just you. The second option is that you go out and you query actual
publishers you submit them your manuscript, then they review it and
they’re like “yeah we really like this here’s a contract sign it, sign your book
away and we will publish it for you and handle everything that’s involved with
it” And then the third option is I want to create my own publishing company. I
want to actually run myself like a business. Maybe I want to possibly branch
out in the future to publish other people’s work and I want it to be more
formal. So why would you want to choose each of these individual options. Let’s
start out with just publishing yourself no publishing company or anything just by yourself. I think realistically this is probably the
easiest option and it’s the one that’s going to give you a lot more freedom as
an author. The benefit on this side is that you completely own your work. You can publish it you can change it however you want to. It’s going to require the least
amount of paper work because all the monetary related things and paying taxes
that’s just your personal account. You’re making an income and you got to pay
taxes on it like you’re making income as an individual. However the downside is
that you basically have no legal protections. If somebody were to come out
and sue you you would be personally responsible for paying that if you lose
the lawsuit. What that means is that if for whatever reason you get sued for
like a million dollars literally everything that you personally own will
have to be sold or given away in order to make back this amount and you will
personally have to pay back this entire amount. Maybe somebody is looking at the
cover of your book and they’re like hey that image that’s on that book is
copyrighted. I own that copyright. I should sue them for damages.
So if you own a publishing company they’re not going to be suing you as an
individual they’re going to be suing the company (LLC) and so what that means if you
eventually lose the lawsuit for whatever reason all that money will be taken away
from the business. All of your personal assets will be perfectly fine but
anything that the business owns, any type of materials or money of the bank
accounts, those will be the things up for grabs. And so this is a way to possibly
lose some your money but not lose your entire
livelihood. But this isn’t necessarily perfect. The courts could decide that you
are personally responsible for making the decision that caused whatever thing
that happened that you’re being sued for. So while the LLC can provide a number
of protections it’s not perfect. It usually depends on the state but in general
LLC’s are very very strong for personal protection. So you’re like “hey great this
is great I can set up a business I’m protected I don’t worry about anything.”
Well yeah but it’s a lot of work and it costs a lot of money to actually set
this up and maintain it as a business. Like I mentioned this is a business.
You’re running a literal business that is registered with the government and
you need to do everything that goes along with that. The first thing you’re
gonna need to do is even set up that LLC. I’d say that for us specifically setting
up that LLC is probably one of the most expensive parts of running our business.
So the initial cost that we actually had to put down to set up this business was
$5000. This isn’t what we paid it was the deposit that we had to put down to
actually say this is an amount of money that we have as an organization to start
with spending. So the actual cost of the lawyers to set up the LLC, they
charged $2, 700 to completely set up our business, file our
DBAs, and basically you fill out all the paperwork. And then at the end of it once
everything was set up they gave us this beautiful binder here and this binder has
literally all the paperwork related to our company that we would ever need. It
has our bylaws, our operating agreements, how the ownership of the company is
split up between Megan and I, how taxes should be filed. Now $2,700, it’s a lot,
but I feel that when you’re setting up this type of organization you’re gonna
want to hire somebody that you know has a very real experience working with it.
You can always go to a company like Legal Zoom or something like that but I
really would not recommend it for doing something as large as setting up an
organization. You’re gonna want to create a one-on-one relationship with a lawyer
because you’re gonna need to go back to them at some point to do some other work.
For example when Megan and I moved apartments we needed to go and ask them
“hey what documents do we need to sign? Who do we need to notify?” and they are
able to do all of it. However it was very expensive to also do that
since that was a lot more work that they had to do. And then not even
including the lawyer fees you need to pay for a ton of stuff just to upkeep
the business. California has a law where every company no matter how much money
they make needs to pay a minimum of $800 a year. It
doesn’t matter how much money you made. Even if you were operating in a net
negative and you barely made anything that year you at least have to pay
California $800. We need to pay for a registered agent which is a person that
basically just sits in an office somewhere that the government can send
mail to make sure that we get legal notices. And then we have to have a ton
of software to just track how our business is running. So for example a
QuickBooks membership and that’s to sync up to our bank accounts and track every
individual thing that we have to spend and then attach the receipts to it
because as a business you need to keep your receipts for literally everything
that you buy. And then all the software that you would normally need to buy to
actually run our business so like the Adobe suite for like Photoshop and After
Effects, ISBNs for our books, there are just so many costs that go into running
a business that you don’t initially think about. So how about we take a look
at what we’ve actually spent on our business. I want to show you guys this so
that you guys understand exactly how much money it takes and along with how
much money we’ve made and you can make the decision as to whether you think
it’s a good idea and want to spend that money. So here we go this is the
screenshot right here of my QuickBooks account of every expense that we’ve made
sense we’ve created the company. As you can see we’ve spent about $1500 on advertising which didn’t work out quite as well as we hoped but
we learned a lot of things. We’ve spent about $800 on software
over the past year and that’s between Google, Amazon services, Shopify, Adobe
products, that’s literally everything that we needed to run our business, make
video content, make publishing content, literally all that stuff. We have some
fees in there that we had for keeping servers for our personal websites and
our business websites. The Cloud Kitten Publishing logo and the design of
Aletheia’s cover is in there as well and that was over a thousand dollars. Then our editing
costs for Aletheia was about $1800. We spent about $1,200 on
actual products so that’s the physical books that we bought to sell to other
people and we did that by going to a convention and we do that on our website. Check out our website down below and buy Aletheia. And also that’s
included in products that we just gave books given away for free either through giveaways
or for friends and family or for gifts or anything like that. You also pay some
money to ship to people. We have to pay some fees to Square whenever you make a
sale. So here we go we have our taxes. As I mentioned we have to pay a minimum of
$800 a year to California so we’ve had to pay that twice now since
it’s almost been two years. We included travel in there to convention and I
think was BooknetFest. And so here you are you can see our wonderful
operating income of negative $13, 000. Now that’s a lot of money. That’s
because it takes a lot of money to run a business like this. So now let’s take a
look at the money that we’ve actually made. Now I’m not showing this for you guys to
be like “oh no they’re so negative” it’s because I want you guys to understand
how expensive it is to run a company like this. Aletheia has sold very very
well for a single published book from an author that nobody had heard of before
Megan published anything before she even really had a social media following.
I think we’re personally doing great and this is something that I look at and
it’s a really great drive forward to say okay this is what we have to work
towards. A lot of people think “oh those authors always trying to push to make
more money and become rich” and it’s not about becoming rich. A lot of
times authors need those sales just to make back the cost of actually
publishing a product. Now it would be great if you eventually after your number of
years and maybe once Megan releases a book or two more that we actually start
becoming more positive but this is something that just needs to happen. When
you’re running a company you’re gonna be negative for a while until you start
getting the company off the ground. So as you can see we’ve made about $300 from Amazon. We’ve sold about $300 worth from
Lightning Source (IngramSpark) directly. So far we’ve made about $150 on
Patreon. About $200 from PayPal from selling
product. Shopify from selling through our online store. Square is the income that
we made at Booknet fest by selling our book directly to people at the
convention (also a formatting job). So if you’re taking a look at that and being like “wow I don’t know if I
can spend that amount of money” or if having that personal protection isn’t
really worth that amount of money in the beginning, that makes sense. There’s
nothing wrong with that. If you want to take on the personal risk, if you’re like
it’s gonna be fine I don’t really think that many people are gonna be reading it,
I know that the stuff that I’ve put in the book is not copyrighted anyway, I
think more than likely you’re gonna be fine. Once you start making thousands of
thousands of dollars from your book then might be the time to think okay maybe I
should go and get published or I should make a publishing company for those
legal protections. But if you’re just starting out I think you’re gonna be
fine just selling the book as an individual author. You’re gonna have a
little bit of issue probably with name recognition because people are gonna say
oh this wasn’t published by a publishing company. But I think even owning our
publishing company, nobody had ever heard of Cloud Kitten Publishing before so it was
kind of like the same thing. Yeah it’s owned by a company but that doesn’t
really mean anything cuz it’s not a company that I’ve heard of before.
But if you’re like hey I really want that name recognition of a publishing
company that’s really good or yeah I think it’s really important to have
those legal protections, you can go out find a publishing company. You’re gonna have the
negative that a publishing company is going to be very picky, it’s gonna be a
lot of work to go and query all of those different publishing companies before
someone finally chooses you, and when they eventually choose you you might end
up losing some control over your creative freedom. But if that safety net
and that marketing ability is really important to you, yeah go ahead and do
that. Like none of these options are better than the other one. They’re all
just different options for different things that people care about. You’re
gonna want to pick the thing that has the best risk to reward ratio for you
specifically and don’t let anybody shame you otherwise. There is one last option
that you can possibly choose. You can go and find a hybrid publishing company. Now
these hybrid publishing companies you’re gonna have to do your research because
they’re given a lot of complaints a lot of times because there are vanity
publishers which you’re basically just paying for work and in which case you
probably should just publish it yourself or there are
actual hybrid publishers that provide a service that I think is a good
mix between having a traditional publishing company protecting your work
and paying all those upfront costs and you needing to actually go out and start
a company and pay that ten thousand dollars to actually run your business.
More than likely the way that that’s going to work is you’re gonna go and
find a hybrid company that you like. You’re probably gonna end up paying them
some money especially if they’re not a big publisher they might not be able to
front literally all the costs of publishing your book and so they’re
usually gonna ask for an amount and usually that’s to cover cover design and
editing specifically. But then you don’t have to worry about literally any of
those other costs. They handle literally everything else and usually they’re
gonna take that money pay for some things pay for a number of services out
of their own pocket and then you’re going to get an actual publishing
experience having to have spent some of your own money but not having to lay
down all of it in order to actually get that benefit of having a pretty much
professionally published book. Hybrid publishers are gonna have a little bit
less name recognition but if you’re going for a hybrid publisher you’re
probably not gonna be going for name recognition and more than like you’re
probably gonna be able to retain some of your creative freedom instead of going
to a normal publishing company and them telling you what exactly needs to change
for them to publish your book. And then in regards to legal protection, more
than likely if they’re going to act as the publisher and so you don’t have to
worry about those legal protections. Just make sure that when you eventually read
the contract that they put in front of you they are taking on the risk of all
these things because if you’re paying them otherwise you’re probably better
off just paying for those individual services yourself. So there you go everyone, that
is my insight anyway into whether you should still publish a book, whether you
should create a publishing company, go to an actual publishing company. As you saw
they each have their individual benefits and trade offs and I think that you’re
gonna need to make a choice as an individual what you think is best for
you and your book. None of these options are objectively better than one or the
other. It’s just a matter of what you think is
gonna be best for you. Don’t let anybody shame you otherwise. It’s your work and
obviously you’re gonna want to do the thing that’s going to benefit your work
the best. Again I’m not a lawyer. Do your own research, go
talk to a lawyer. A lot of times you can go to them for free and they’ll be able
to tell you what they think you should do and how much it’s going to cost. Again
Thank You Courteney Levit for recommending this topic. I think is very
important. If you guys have any similar types of questions or questions about
publishing in general leave us a comment down below what you want to see us make
a video about. Go become a patron. Go become a Kitten in the Kitten Coalition at
our Patreon. We have a ton of beautiful wonderful benefits that you get between
extra video content like bloopers and vlogs, you can even get some critiques by
me and I’m pretty harsh. So that’s it guys if you enjoyed this video leave us
a like, please subscribe if you haven’t already, if you’ve already subscribed ring that bell so you can be notified whenever new videos like this are
released. We released three times a week. And yeah go check out a Patreon! We love
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23 thoughts on “Costs of Creating a Publishing Company to Self-Publish Your First Book”

  1. Michelle Winkler says:

    Excellent video! I like that you emphasized that there's no judging cause each option has its merits 🙂

    I think you missed one option: Creating a publishing company as a Sole Proprietorship (sp?) I think only individuals can use that option and it doesn't have the same legal protections, or fees that an LLC does. Also each state may have different rules about them.

    I just thought I'd bring it up for future reference or if someone reads the comments, it's another option to look into. Loved the video though, as usual 🙂 <3<3

  2. Lost Train of Thoughts says:

    I felt like I was back in school. So much information. But thorough.

  3. Kaye Spivey says:

    This was really useful. I'd never thought about what goes into actually starting a publishing company. I'd like to hear more about the mechanics of your company in the future!

  4. Hannah Jane says:

    It makes sense that in the first year there's a bit of a loss when it comes to income when running a business because of all the setup costs. I'm in Australia so I'll probably do research for over here 🤔 but thank you for the transparency!

  5. Arnella Hobler says:

    Thank you so much for your transparency and honesty. This was a very interesting watch. I live in Sweden so naturally things are a little different here but I still found this useful. I suppose my main concern would be which option makes it more or less of a hassle to sell books internationally? For instance, if one was to order a physical copy of Aletheia from Amazon UK, would it still be printed and/or shipped from the US, and would that mean international shipping costs for the customer? A bit of a specific question, but I was curious. 🙂

  6. Ryan Medina says:

    I shouldn't watch a video this deep first thing in the morning. So many numbers so much to think about. But this was very informative. I think its time for the cats to get a job and pitch in to help. Echo can make sweet bank as an assassin.

  7. Writing with Jenna Moreci says:

    This was fantastic!

  8. Catherine Doveland says:

    wow, thanks for being so honest and open about this! How much you guys are willing to share and do to help others is really amazing

  9. A.J. Torres says:

    Thank you so much for the info 🙂

  10. Geek Clan Robinson says:

    This is very helpful. Also, I love your bookshelves.

  11. SarahMorin says:

    I'm wondering how an author can get sued? Other than plagiarism and slander, what else is a risk?

  12. iWriterly says:

    This is the best, most though-out video I’ve seen on if you should start your own publishing company. Thanks so much for sharing your experiences!

  13. David Decero says:

    Great and valuable information. Thank you for this!

  14. P H A N Y says:

    Huh, it‘s so interesting to see that American company-models work different from German ones.
    I talked to an American friend the other day and he explained to me very roughly how tax works in the us. It‘s fascinating! 🙂

  15. Kat Sperling Books says:

    Thank you so much for being so open and transparent! Most people wouldn't be willing to share numbers and talk about money and I'm extremely grateful you did!

  16. Steven Partridge says:

    This video was extremely educational! Thank you for making this and being so transparent with everything!

  17. h f says:

    What would you have done differently knowing what you know now?

  18. Lee Sha says:

    Hi man! Love your video. I have one question, I am a bit confused. Did you need to set up your publishing company in California?

  19. The Wrestling CHICK NETWORK says:

    Love this video. Thanks for sharing this very important information.

  20. PianoMan 2018 says:

    Excellent vid! Any reason why Allegiant, the 5th book from the top on the left is upside down? I don’t notice that anywhere else on your book shelves:) (I wouldn’t start a business in California if you paid me. Where do those fools think the money comes from in an economy, outer space?) *Ever thought of moving instead of walking backwards up the DOWN ESCALATOR???* California does NOTHING to motivate an entrepreneur. That’s terrible:(

  21. KitoKamiliMusic says:

    Very much appreciated <3

  22. Errol Thomas says:

    it doesn't necessarily have to cost you 5k$ to start and register an LLC or Scorp. You can use an online service and get the same process done for about 200-500$ depending on the state you're in because there are different state fees and you will get a binder just like this guy and the Articles of Organization, etc. Also you can file for your EIN( tax id) for FREE! on the IRS website. I only speak from experience because I have done this personally 3 times with my businesses.

  23. Errol Thomas says:

    Another note, it is also beneficial to owning your own ISBN numbers when self publishing and it actually doesnt cost you too much. You can go to Bowker and buy a single isbn for 125$ or 10 for 295$, I recommend the 10 because if you sell in multiple formats such as paperback, audiobook, ebook, you will need 3 different ISBN. You can use the rest of the ISBN in the future for example if you want to update and make a 2nd or 3rd edition version of your existing book

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