The Business Side of Being an Independent Editor
Panlists: Zainab Hussain, Ann Gosch, and Greg Parry
Moderator: Kathleen Walker
Day of Meeting: March 9, 2015
Meeting Notes
(Notes taken at the meeting by Hedi Sewall)
Announcements:
Kyra Freestar: Once or twice a year, Karalynn Ott teaches an online class through the AuthorEditor Clinic that focuses on setting up and running a business around freelance developmental editing. It's called (tadum): The Business of Freelance Developmental Editing. You can sign up now for a session scheduled to begin April 7, 2015: http://www.authoreditorclinic.com/editors/
This is a four-week class, all online, that covers basic business license and tax setup as well as more intricate issues to do with defining and communicating to clients what you do (and don't do) as a developmental editor, estimating, negotiating, and writing up clear agreements. The class is tailored to developmental editing, which can be harder to define sometimes than copyediting or proofreading. That said, the work I did, when I took the class, on developing written materials and contracts has been a huge help to me in the years since.
I'm happy to answer any questions about the class, as are, I am sure, Karalynn Ott (instructor) or Barbara Sjoholm (director of the AuthorEditor Clinic), who are both Guild members as well.
Beyond the Red Pencil: Editing in the 21st Century
October 10, 2015
Keynote speaker: Steven Pinker
New York Times bestselling author, linguist, talented scientist, and chair of the Usage panel of American Heritage Dictionary. He will speak on his latest book which is called, The Sense of Style, The Thinking Person’s Guide to Writing in the 21st Century. He is rethinking the usage guide and applies insights from sciences of language and mind to the challenge of crafting clear, coherent and stylish prose.
If you are interested in presenting a session at the conference, the call for presentations is open for another week, or longer. Check the conference page on our website for information on how to submit an abstract.
From time to time we will be asking for volunteers for the conference, and Pm Weizenbaum is the chair for volunteers.
Panel Discussion
Welcome by Kathleen Walker. Tonight is live and will be available on YouTube after the meeting. Two handouts will be posted online. Active listserv is a good way to get your questions answered by other members of the guild.
Kathleen: There is a breadth of knowledge and experience on our panel tonight that we will only be able
to scratch the surface of in the next hour plus. And given this breadth, our question topics may jump radically from subject to subject—but nonetheless, it is all in service of this evening’s mission of providing some answers and stimulating a lot of productive thinking as we go about dealing with the business side of editing.
Hardcopy handout
Our panelists have put together some well-condensed information for our reference long after this evening, and there’s a good chance you will find some of your questions addressed in this content. Hang on to this!
Let’s welcome our panelists:
Ann Gosch, by Gosch Editorial Services, has been an editorial freelancer since 1987. An Oregon State University graduate in textiles and apparel merchandising, she began freelancing in the fashion sewing industry as a technical and feature writer. Over 15 years, she contributed more than 350 articles to specialty publications and edited books for crafts publishing houses. During the 1990s, she branched out in subject matter and clientele and came to realize that editing was a better fit with her skills than writing. She now focuses on substantive and copyediting of trade periodicals, nonfiction books, and business communications, both inside and outside the sewing industry. She served on the Editors Guild steering committee from 2002 to 2006, then chaired the Editors Guild conference “Beyond the Red Pencil No. 2,” in 2009.
Zainab Hussain is an attorney at Foundry Law Group, where she works with innovative clients to protect and leverage their intellectual assets. She combines strategic business and intellectual property solutions through customization and creativity, achieving meaningful and long term results for clients. When she isn’t working, Zainab enjoys writing for the firm blog, trying out new places to eat, and subsequently, exercising to burn off all those restaurant calories.
Greg Parry has worked in public accounting and private industry for 25 years. He currently has a home based public accounting practice, providing income tax preparation for individuals and small businesses, tax consulting, Quickbooks training, and bookkeeping.
Order of conduct:
I will moderate a few rounds of preorganized Q & A, and then we will open the floor to questions. So please take notes and organize some questions of your own for that opportunity. Panelists, when you think it appropriate, please contribute from your own experience of a question’s subject that is first steered to another panel member.
Q&A
Greg Parry, as our CPA: What advice or options do you recommend for someone who only occasionally works a freelance job: Simply declare any money made as personal income on an individual tax return and not bother with any formal business structure?
Greg: If it is a small amount of income on occasional freelance jobs it is ok to just report it on Schedule C of the Profit and Loss for Business Sole Proprietorship.
Q: So when you say a small amount of income, are you able to give a number to us?
Greg: It depends on your liability exposure. If you think that you are going to be subject to more personal liability than you are comfortable with, then you should consider forming an LLC where you are protecting your personal liability from the business debts and other possible liabilities like contract liability.
Q: So an LLC actually protects you from those types of liabilities?
Greg: Yes.
Q: So are you able to enumerate them or are there other liabilities that extend beyond that that you are protected from?
Greg: The only risk of loss is your investment into the LLC, but it also protects you from contract liability. It doesn’t protect you from your own negligence or malpractice, or the negligence or malpractice of your employees or people under your control.
Q: So, what would be the key questions I would want to ask myself to decide which business structure to pursue, a sole proprietorship or an LLC? What should I ask myself to help me make that decision?
Greg: It is a decision based on how comfortable you are with liability exposure. It is also possible to reduce your liability exposure through insurance, so you could decide whether you want to purchase insurance or reduce liability through choice of business structure.
Q: At what point should I think about getting a business license?
Greg: The State of Washington require you get a business license if you meet any of several conditions, and they are:
1. business gross is $12,000 more year,
2. you are doing business with a name other than your full legal name,
3. you plan to hire employees within the next 90 days,
4. or you sell a product or service that is taxable.
Q: Is that information in the handout?
Greg: There is a link in the handout to the Department of Revenue website.
Q: Ann, on the topic of timekeeping: do you have any special apps or programs that you use? What is your method of timekeeping as a freelance editor?
Ann: I have only been using paper until this month. For many years I simply had a piece of paper for each client listing the work that has been done, start date and end date, and total up the hours. I invoice monthly, so at the end of the month there is the figure for the amount of work I have done for each client.
Q: Do you ever find that you are surprised at how much time you spend on a project?
Ann: Sometimes.
Q: How much time do you dedicate to business tasks?
Ann: It varies a lot, depending on my client’s needs. Some of my clients are not very good about letting me know when their deadlines are, even when I ask them. It is variable.
Q: How much time do you put into networking and maintaining business relationships?
Ann: That is an ongoing thing. I have done a fair amount of networking over the years and it is important to keeping your business going and being visible in the community. It is something that I devote a fair amount of time to—not more than I devote to editing, but it something that needs to be ongoing. I belong to several organizations in the Tacoma area where I live. It is ongoing.
Q: We are going into contracts with you Zainab. When we negotiate contracts with clients are there any clauses or particular language that might be red flags?
Zainab: Yes, there are always a couple of clauses in contracts, across the board, not just if you are an editor. This information is applicable if your role changes down the road. In general, the big three are:
Indemnity clauses,
Liquidated damages clauses
Noncompetes.
Noncompetes can be a clause in your contract or a separate contract entirely, depending how big the job is or the scope of your work. I will explain briefly.
Indemnity: a clause in the contract that says “If I screw up as an editor, you, client, will pay part of my legal costs because I retain no ownership of your work and so I should not have to pay any legal costs in this matter.”
Liquidated should be avoided. With liquidated damages, if you are party to a suit or legal proceeding, you agree to pay 10% of the damages claimed. A $10,000 suit will result in a 10% payment of that cost. Remove any liquidated damages clauses.
Noncompete: this is the most important. The other two clauses may not be changeable depending on who you are in the relationship. If you are the small fish, you may not be able to change the clauses. If you are working with a large company, you likely won’t encounter the issues with indemnity and liquidated damages.
The noncompete, however, is really important regardless of your client, because you don’t want to be prevented from working in the same industry or same type of work by a client. Noncompetes are generally only enforceable if they cover a reasonable geographic area. For instance, you promise not to work in the greater Seattle area. The noncompete has to be for a reasonable duration, not forever. Usually the timeframe is two months, depending on the type of work it is, up to two years.
Q: Can we exchange a series of email messages with a client that could serve as a contract in a court of law? If so, what should those messages include?
Zainab: Don’t ever think a series of email messages has bound you, or someone else, into a contract. If you do have an understanding through email, put it on a document to memorialize it. It may turn out that
you have misunderstandings through the email that get cleared up when you synthesize a contract. You have a more enforceable document and you create a better working relationship. Emails don’t tend to be enforceable because a lot of context is lost. I have never come across a lawsuit where a contract was assumed strictly through email messaging. A general paper contract is what you should go for.
Q: Could it be a PDF contract that was emailed?
Zainab: You don’t have to print the contract, but it should not be simply from your Gmail address. Electronic contracts and electronic signatures are totally fine. Those both bind you.
Q: Back to Greg. Would you recommend editors invest in bookkeeping tools, and if so, what tools?
Greg: I recommend to invest in Quickbooks software. It allows you to easily set up a business and allows several options for how to set it up. It is designed to be easy to understand the recording process. I recommend you set up a separate bank account and credit card account, which recommended by the IRS, and have a filing system where you track your receipts.
Q: I have several small business ventures and am wondering if I can use one Quicken program (for mac, in my case) to set up all of these separate accounts? Honestly, the checking accounts and credit card charges tend to intermingle, so is it better to just set them all up in different categories in the same account?
Greg: Are these separate businesses?
Audience member: Yes, I freelance in three different businesses. I file separately in all of them.
Greg: With QuickBooks you can easily set up multiple business and record expenses separately.
Audience member: Does QuickBooks work on the Mac?
Greg: There is a QuickBooks for Mac version. I have heard it is not as robust as the Windows version, but I know people who are perfectly happy with it.
Audience members: [illegible comments]
Greg: You used to be able to convert a Mac file to a Windows file in QuickBooks. There are instructions in QuickBooks that tell you how to do it.
Q: What types of expenses should independent editors track for tax purposes?
Greg: A business expense has to be ordinary and necessary to be deductible. To be ordinary it has to be commonly accepted in your trade. For necessary it needs to be helpful and appropriate. It does not need to be indispensable. Any expense that you incur in earning your business income is deductible. Computer, printer, yes. There is also a division between capital expenses and personal expenses. Your business expenses are currently deductible. Business assets, improvements, and startup costs greater than $5,000 have to be capitalized and cannot be expensed. They are expensed over the life of the asset.
Q: What about conferences and memberships and journals?
Greg: All of those are deductible.
Q: We will move to you, Ann. What are the most effective steps you have taken to build your referral network? Is there anything specific that you are really happy you have done?
Ann: Networking, as I have mentioned, is really important, along with keeping people apprised that you are an editor and that you are still working. Tell them you are looking for interesting clients and projects. I heard a marketing guru say that the first rule or marketing is: open your mouth. Nobody knows what you do if you don’t tell them and you never know where a referral might come from. It is important to visible, to be out there, be professional, and be good with what you do so you have a good reputation no matter what you do. Our reputation is what we have to sell and so it is important to be out there and be sure that your reputation is good so that people think of you and are happy to refer you to people.
Q: Are there any particular job boards you recommend?
Ann: NWIEG job board; Communicator’s Jobline maintained by International Association of Business Communicators and Public Relations Society of America (editing would be considered communication); job board run by the Public Relations Society of South Sound. Met a contact at a networking event put on by Book Publishers Northwest, mentioned my interest in becoming a freelancer, followed up later with the contact, and eventually was given a proofreading job which led to copyediting. This start grew into a six-year relationship and included work on 35 books. Work all the angles that might bear some fruit.
Q: Zainab, we are going to get into your area by asking about copyright. How does one identify the owner of a specific copyright? What if I cannot locate an owner? (For example, we can't reach the original source of an article/photo/text to get permission. Or they have gone out of business. Now what do I do?
Zainab: If you want to ask for permission to cite an author, try a Google search to find the author. Also, the Copyright Office has a recordkeeping database (very archaic) and an online version of the database. The URL for the Copyright Office records is (I believe): copyright.gov/records. You should be able to find post1978 works in the Copyright Office database. It includes music, sculptures, artwork, and text. Copyright in the U.S. takes effect without registering the work, so a lot of people don’t register. Do what you can to find the source and email them twice, or have some form of written communication that you send to them requesting permission. After attempting to contact the source, cite what you do know and declare it as an orphan work. An orphan work is something that you know is copyrighted by virtue of being produced in the U.S., but it does not have a parent (an owner). Often when you cite something as an orphan work, the owner appears to collect royalties, grant permissions, and gain payment of fees. Do your diligence and have evidence that you tried. But don’t go beyond two attempts over a couple of months.
Q: Under normal circumstances when you know the owner of the copyright, how long should you expect to wait to get permission?
Zainab: I am unfamiliar with the timelines that editors work with and I have never had to get permission from an author.
Kathleen: I have obtained permission and it took 72 hours.
Zainab: I have done some research and it kind of depends on what you are trying to get permission for. Getting permissions for song lyrics involves contacting ASCAP, BMI, or [CCAP? inaudible], and they have teams of people granting permissions. The process for song lyrics is very fast.
Q: While I copyedit a book, what happens if I do not look up each Trademark and represent it properly? Can the author be sued? Can I be sued?
Zainab: You don’t have to look for permission if you are using a trademark to describe a good or service itself. So, if there is no way to describe a burger besides McDonald’s burger, you can freely use the term McDonald’s—you are just using it as a descriptor to identify the source of it. It only becomes an issue when you are trying to develop some sort of theme, such as big bad corporation, and you use the term McDonald’s to refer to all big bad corporations. You should seek trademark permission in this type of usage (you probably won’t get it). You will also want to get trademark permission if you are using the term often in a work—it just makes sense to get permission when it is so prolific in your work.
Q: Greg, when it comes to tax planning, what questions should independent editors make sure to ask their accountants?
Greg: Ask if you need a federal tax ID (the answer is yes if you have operate as a corporation or a partnership, or if you have a retirement plan). Another question would be what are the ways to reduce my tax exposure? One way is to properly track and deduct all of your allowable business expenses, such as home office deduction and business auto use. Also choice of entity is one way to reduce tax; S Corporation and LLC eliminate federal taxation at the business entity level, whereas with a corporation you are taxed at the corporate level and the individual level. Also, with an S Corporation you limit your self-employment tax to the W2 wages, and as long as the wages are reasonable, the distributions are tax free (not subject to self-employment tax such as Medicare and social security). You can also set up retirement plan for tax deferral.
Q: Do think it is advisable to get a tax ID number regardless of whether you are a corporation or a partnership because of the possible identity theft?
Greg: In that case, yes. It is a very simple process on the IRS website to get a tax ID. It only takes a few minutes and it is free. This is the EIN.
Q? I recently realized that I should have an employer ID (tax ID) so that I don’t have to give clients my social security number (for when they generate a W2). However, I’m confused about how filing my taxes would work. If in a year I made money under my social security number and also under the new employee ID, would I have to file my taxes twice? Or could I combine it all together?
Greg: You would have to report the income under the ID it was reported under.
Q: Contract question: a lot of my corporate clients have been asking me to sign a contract stating that I have liability insurance, but liability insurance is expensive. Is this clause something I can strike out of the contract? Tax question: do I have to keep my paper receipts?
Greg: You can use your credit card statements. You do not have to have paper receipts; you can use credit card statements as substantiation of the expenses. You can also use your bank statements.
Zainab: Definitely try to remove the clause stating you have liability insurance, especially if it is a substantial expenditure—something that totally outweighs the value of the work itself. I would negotiate to remove it entirely or have some sort of common ground where either they are able to indemnify you for any liability you do incur. See what they come up with. It depends on who you are negotiating with.
Q: What is the value or wisdom of purchasing Errors and Omissions (EO) insurance?
Ann: I have never had EO insurance, and this question came to me. I found an article on americaneditor.wordpress.com which leads me to ask what kind of work we do that puts us in need of liability insurance. Does anyone have an example? The author of any given work is the final arbiter. We are also not the final decisionmaker on the manuscript, so cannot be held liable when we are not the final arbiter. We have no control after it leaves our hands. I have pointed out potential problems to clients when they have stated information that is incorrect or if they have plagiarized. I don’t see how I could be held liable for the error when it is up to the client.
Comment from an audience member: I once worked as a writer on a project and was contacted after publication regarding a cartoon that was protected by copyright and reprinted without permission in this particular book. The publisher was looking for the freelance editor (one of many) who was responsible for the mistake of allowing the cartoon to be included.
Ann: It obviously depends on what you have been hired to do and the expectations of your client.
Comment from an audience member: I do technical reports, and in editing a manuscript I query and then save my queries. If there is ever a question about accuracy, I can refer back to my queries. I let them know my job is grammar, syntax, consistency, spelling, and I defer to them for professional expertise.
Summary: You are not subject matter experts. Query as necessary and save the queries.
Zainab: Ann brought up a good point about not having a lot to be liable for. Going back to liability coverage, if you get pushback from a client when you ask to have the liability clause removed from a contract, then ask what situation they think may come up that would require to you assume liability. You don’t hold any rights in the work, except your edits, and with edits you hold rights only up to the point at which you are paid for that work. Once the manuscript goes back to the author, they are the final arbiter.
Q: How do you choose clients and decide you are a good match for them? Do you actually charge for the time you spend meeting with them to make the decision?
Ann: I don’t very often meet with the client. We cover, by email, the project, timeframe, level of editing, and subject matter. The few times I have met with potential clients, I have not charged for my time, but rather limited it to thirty minutes. I only meet with them if I have already decided it is a project I want to pursue and they, in turn, want to work with me. We meet to clarify the project.
Q: Zainab, what is your opinion regarding the practice of using email to work out a contract and project details with international clients?
Zainab: A contract is defined as the meeting of two minds to a common understanding. So, if you and your client understand that the email constitutes a contract, then you probably have a contract. In the previous question I was asked if an email message is an enforceable contract. You are only asked if a contract is enforceable if there is a problem with the project. It is likely that your adversary will say “I never thought that was a contract; it is only email—what are you talking about?” My first point is that you will never look again at a contract unless something has gone wrong. My second point is that it has gotten a lot easier to get signatures online. Esignatures are totally valid in the U.S., even when used by international clients. At my firm we use an Adobe product called Echosign, there is also Docusign and SuperQuick. It is easy to get these signatures and they are valid. If your clients understand that you are creating a contract via email correspondence, then it is fine. I would feel uncomfortable I would feel leery of defending a contract created by email.
Q: Is income earned in another state reported on the Washington State Excise tax form?
Greg: Washington State does allow you to apportion income, but there are certain thresholds you have to meet in order to do it. If you apportion the income, you will not report it on the Washington State Excise tax form. If your earnings do not go above the established thresholds, then you are required to report the income on the excise tax form.
Q: How much would you have to earn as an editor to pay revenue tax in Washington State?
Greg: You still have to file if you earn over $28,000 per year. Because of the small business credit you are allowed to take, then you won’t have to pay under $56,000 (annual). This figure is based on gross receipts.
Q: What is public domain and Creative Commons? How can I use it to my advantage?
Zainab: Creative Commons is a big advantage for you. As I mentioned before, the Copyright Office is archaic, and registration is not required to establish a copyright. Creative Commons allows authors (including authors of sculpture, music, literary works, and other expressions fixed in tangible media) to have a license. A Creative Commons license is generated and put on your work. There is no use charge for someone who wants to use your work, but there is accreditation and attribution of your work because you have the Creative Commons license. This license is used in conjunction with copyright. The user of your work is not obligated to pay for the use of the work, but is obligated to cite and acknowledge ownership. It is most used for images—such as Getty Images. Also used for short excerpts of text.
Q: When you contract with an author to copyedit a book, do you request that your name be included in the “acknowledgments” page?
Ann: I have never requested that my name be included, but I have requested that it be excluded. It is my understanding that lot of publishers don’t include the editor in the acknowledgments but may include the editor’s name on the copyright page. I have been listed on the copyright page. Sometimes the author has included me in the acknowledgments.
Q: What are our obligations once we purchase a business license?
Greg: You must renew the license annually and file a tax return. The information can be obtained on the Department of Revenue website and the City of Seattle website.
Q: How do I submit samples of my work to a potential client when all of my work falls under a nondisclosure agreement?
Zainab: You should honor your nondisclosure agreement. It is very likely that your new client will also
have a nondisclosure agreement. Since corporate communications is your primary line of work, you don’t want to have a reputation with even one client that you might not be enforcing the nondisclosure. I have worked with a number of clients to create representative templates of work, which doesn’t require actual proprietary information, but maybe something that you have used in work for multiple clients— something representative. Tell you prospective clients that you are under nondisclosure and are prevented from sharing actual examples of your work. Explain that you want to share a template that represents very nearly what you do and that you hope it gives them a good sense of your work.
Q: What about something that is published? Can you link to it?
Zainab: Once something is published, then it is disclosed by and is no longer part of your nondisclosure agreement.
Ann: As an editor I find it difficult to have a portfolio because I wonder what to show?
Comment from audience member: You show the kinds of things you catch and the queries you ask.
Comment from audience member: In my portfolio I have a before and after picture, showing the errors I corrected.
Q: If I apply online for the Employer Identification Number, is this a red flag for the IRS that I should be reporting quarterly income? If I get the EIN, is there some tax consequence? Do I have to file quarterly?
Greg: There are no tax consequences when getting an EIN. You report your income annually on Schedule C for a sole proprietorship or an LLC. Payment of estimated taxes is quarterly. You only have to pay the estimated taxes if you think you are going to owe over $1,000 on your income tax return (after refundable credits and W2 withholding has been deducted). Also, the W2 withholding with refundable credits would also be less than 100% of your prior year tax or 90% of your current year tax. If you owe $1,000 or more after all of these things have been deducted, then you need to pay estimated taxes. There is a worksheet that allows you to calculate the quarterly payments.
Q: The Employer Identification Number is not a red flag for the IRS?
Greg: No, the EIN is not a red flag.
Q: If I just file the annual, I don’t necessarily need to pay the estimated taxes?
Greg: The safe harbor would be to pay 100% of the previous year’s tax in estimated quarterly payments.
Ann: On copyright permissions, I want to make the point that I have quoted Chicago Manual of Style regarding copyright laws while also clarifying that copyright is not my realm of expertise. I give them some basic information and they can pursue it further if they choose. I make sure to tell them that copyright advice is not in the scope of my work. You can offer some consultation without claiming that you are the final authority.
Resources
Zainab Hussain, Legal Officer Foundry Law Group
3417 Evanston Avenue N Seattle, WA 98103 202.922.9502 zainab@foundrylawgroup.com
Ann Gosch
Editorial Services 7902 56th St. Ct. West Tacoma, WA 98467 253.566.0460 ann@bygosch.com www.bygosch.com
Gregory S. Parry, CPA 2715 Mayfair Ave N Seattle, WA 98109 206.283.7397 gregparry@q.com
Kyra Freestar
2063002601 kyra@bridgecreekediting.com www.bridgecreekediting.com
Websites:
Author Editor Clinic: http://www.authoreditorclinic.com
International Association of Business Communicators: http://www.iabc.com
Public Relations Society of American, South Sound: http://www.prsapugetsound.org/Page.aspx?nid=118
Search Copyright Records: http://copyright.gov/records/
An American Editor: https://americaneditor.wordpress.com
Creative Commons: http://creativecommons.org