Starting a free newsletter is easy.
You just need a laptop and a place to publish it.
These days, with sites like Substack that handle distribution and email, you can get up and running in an hour.
Starting a paid newsletter is easy too… but there are some important things you must have in place.
First, you’ll need a way to accept payment from your readers
If you host your newsletter on Substack, your only option is through their preferred payment processor, Stripe. You’ll pay 30 cents + 2.9% of every transaction.
If you’re not on Substack, you’ll need another system, like Square or Quickbooks Online.
Important: be sure whatever you choose offers recurring billing. You don’t want to be manually sending invoices every month.
Some payment processors will ask if you want to accept credit cards. If you say no, your customers will only be able to pay you through ACH bank transfer – which is free to both you and your customer.
If you say yes, your customers can pay you with Mastercard, Visa, and American Express. This will cost you money. You’ll pay in the ballpark of 2-3% per transaction to accept credit card payments from Mastercard and Visa – and a little more for Amex.
Some sites including Substack now let you accept Bitcoin as payment. If you do, consider changing it to cash as soon as you get it, so you aren’t taking unnecessary financial risk.
You’ll definitely need a business bank account
Getting a business bank account is an absolute must.
It’s very, very important to keep your personal finances separate from your business finances.
If the IRS ever audits you, the first thing they’ll look for is if you keep your business and personal finances separate. If you can’t answer ‘yes,’ you’re in for a lot more probing questions, and that could cost you a lot of money.
Many business bank accounts are free, so there’s no reason not to get one. You can easily do it online, in most cases.
You should also get a business credit card. Credit cards have better fraud protection than bank accounts. And many business credit cards pay significant rewards – like 2% cash back – that you can’t get with a bank account.
You probably should form an LLC
An LLC makes you legally separate from your business. If your LLC gets into legal trouble, it’s usually not quite as bad as you personally being in legal trouble.
This is an important layer of protection that can insulate you from liability in certain circumstances. But it is by no means bulletproof. You’re still responsible for actions you take on behalf of your business.
Most people think LLC status determines your taxes … but this is wrong.
LLCs do not exist in the eyes of the IRS. When you form an LLC and you’re the only owner, the IRS sees you as a Sole Proprietor. Sole Proprietors do not file separate business tax returns. They simply attach a page or two to their personal tax return.
You might want to become an S Corp
After you’ve formed an LLC, you can make an election to be taxed as an S Corp.
Unlike a Sole Proprietor, S Corps file a separate business tax return from their owners. This makes your taxes a bit more complicated, but the savings can be worth it. You may get a big break on self-employment and other taxes if you turn your business into an S Corp.
There’s no blanket rule, but it’s worth looking into becoming an S Corp if you collect more than $50k – $75k revenue annually. At this level of revenue, becoming an S Corp could save you around $2K – $3K a year, possibly more.
When to hire an expert to help manage your books
Make it a priority to keep your books clean from day 1. It’s far, far harder and costlier to go back and fix messy books than to keep them clean in the first place.
You should start keeping your books as soon as you launch a free newsletter. Although you won’t have revenue to track yet, you’ll have expenses to keep track of. If you’ve got the time and desire to learn, you can probably get away with doing your own books at this point in Quickbooks Online.
Link your Quickbooks to your bank and credit card in order to automate 60% of the bookkeeping process.
Once you launch a paid newsletter, it’s time to get an accountant (CPA) who’s knowledgeable about subscription businesses.
I recommend having the same firm do your bookkeeping and taxes. Otherwise, you’ll have people constantly passing your financial info around – which can create tension, confusion, and missed opportunities to save money.
Once you earn $50K – $75K and you’re looking at forming an S corporation, you absolutely need a CPA. Don’t try to file an S Election without help from a pro.
At $75K revenue and up, consider finding help with cash management. You’ll have more expenses–and potentially larger expenses like paid marketing and hiring employees or contractors.
Once you hit around $200K in revenue, you’re ready to start thinking about the next step. Consider getting expert guidance from a specialist with a proven track record who knows the subscription business well and can be your CFO.
A great virtual CFO will help you strategize, grow profitably, and maximize the amount of money you take home.
If you have any questions about any of the points covered in this article or would like to discuss our accounting packages, then feel free to book a no-strings accounting-relief call with me.