Whether it’s for privacy reasons, or practical reasons, you might decide to use a pen name to publish your book. That’s totally acceptable. Here are some nifty things you’ll need to know:
You can have as many pen names as you want, but you’ll still have to provide your real identity on any legal documents (such as contracts), and sign with your real name. Your Social Security Number, tax information, and bank accounts are still linked to your real name, and you won’t be able to cash a check made out to your pen name.
A pen name is treated as a stage name, in other words, not as a separate business entity. Whatever name you choose, in the eyes of whoever you contract with, you’re still you, and you don’t need to register it as a new identity or business. That applies to any income, taxes, legal issues, etc. However…
You can register your pen name as a small business, which gives you slightly better legal protection, but is also subject to business licensing fees. You can get an LLC or even incorporate. This is usually done for tax or financial purposes when you want to separate your business and personal holdings in case disaster strikes.
From a more book-related standpoint, your name will be your brand, and changing it later on will be very difficult. More than likely, your backlist will be tied to the original author name you used, and you will only be able to change your name going forward.
Some people suggest using different pen names for different genres you write. The advantage there is that you protect “brand integrity” if you have a large backlist or a long series in a particular genre. At that point, publishing something completely different could confuse your loyal readers or even make them feel betrayed. One disadvantage of multiple pen names is that you effectively cut your backlist into portions, which might not look so impressive on their own. You might also face a difficulty in rebuilding your readership base from the ground up, depending on how loyal your current genre readers are, how open they are to other genres, and how successful you will be in promoting your new identity to the world at large.
In some cases, however, you might find that you have to have separate pen names. This might happen if your chosen genres are so different it would cause problems to have them both under one name (hardcore erotica and children’s books, for example). Or you might find that your publishing contract stipulates you cannot use your original name on publications outside of your publishing house. It can and does happen, which is why making sure you have read and understood your contract is so very important.
When it comes to voluntarily deciding one way or the other, as long as you have thought through your strategy and you know the potential risks and benefits, the choice will be up to you. I would say that if you’re going to use multiple pen names, for the sake of your own sanity, try to limit them to two or three at most. Remember that readers will likely expect you to release roughly one book per year, and that’s a tall order for any one person, let alone one person acting as three different ones.