What do I need to do to form an LLC?
I know that there are a lot service on the internet helping to form an LLC online with a fee around $49. Is it neccessarry to pay them to have an LLC or I can do that myself? No, you can do it yourself. The $49 is for your convenience, but there's nothing they can do that you wouldn't be able to do on your own. What I need to know and what I need to do before forming an LLC? You need to know that LLC is a legal structure that is designed to provide legal protections. As such, it is prudent to talk to a legal adviser, i.e.: a Virginia-licensed attorney. Is it possible if I hire some employees who living in India? Is the salary for my employees a expense? Do I need to claim this expense? This, I guess, is entirely unrelated to your questions about LLC. Yes, it is possible. The salary you pay your employees is your expense. You need to claim it, otherwise you'd be inflating your earnings which in certain circumstances may constitute fraud. What I need to do to protect my company? For physical protection, you'd probably hire a security guard. If you're talking about legal protections, then again - talk to a lawyer. What can I do to reduce taxes? Vote for a politician that promises to reduce taxes. Most of them never deliver though. Otherwise you can do what everyone else is doing - tax planning. That is - plan ahead your expenses, time your invoices and utilize tax deferral programs etc. Talk to your tax adviser, who should be a EA or a CPA licensed in Virginia. What I need to know after forming an LLC? You'll need to learn what are the filing requirements in your State (annual reports, tax reports, business taxes, sales taxes, payroll taxes, etc). Most are the same for same proprietors and LLCs, so you probably will not be adding to much extra red-tape. Your attorney and tax adviser will help you with this, but you can also research yourself on the Virginia department of corporations/State department (whichever deals with LLCs). "You can file an LLC yourself in most states, although it might be helpful to use a service if you're not sure what to do to ensure it is correct.  I filed my LLC here in Colorado online with the Secretary of State's office, which provided the fill-in-the-blank forms and made it easy. In the U.S., taxation of an LLC is ""pass-through"", meaning the LLC itself does not have any tax liability.  Taxes are based on what you take out of the LLC as distributions to yourself, so you pay personal income tax on that. There are many good books on how to form and then operate an LLC, and I personally like NoLo (link to their web site) because they cater to novices. As for hiring people in India, I can't speak to that, so hopefully someone else can answer that specific topic. As for what you need to know about how to run it, I'll refer back to the NoLo books and web site."
I am surprised no one has mentioned the two biggest things (in my opinion).  Or I should say, the two biggest things to me.  First, 1099 have to file quarterly self employment taxes.  I do not know for certain but I have heard that often times you will end up paying more this way then even a W-2 employees.  Second, an LLC allows you to deduct business expenses off the top prior to determining what you pay in taxes as pass-through income.  With 1099 you pay the same taxes regardless of your business expenses unless they are specifically allowed as a 1099 contractor (which most are not I believe).  So what you should really do is figure out the expense you incur as a result of doing your business and check with an accountant to see if those expenses would be deductible in an LLC and if it offsets a decent amount of your income to see if it would be worth it.  But I have read a lot of books and listened to a lot of interviews about wealthy people and most deal in companies not contracts.  Most would open a new business and add clients rather than dealing in 1099 contracts.  Just my two cents... Good luck and much prosperity. Having an EIN does not make the LLC a corporation -- your business can have an EIN even when treated like a sole proprietorship. An EIN is required to have a Individual 401(k), for example. But you can still be an LLC, taxed as a sole proprietor, and have a 401(k). You would need to file a Form 2553 with the IRS to elect S Corporation status. If you don't do that, you're still treated as a disregarded LLC. Whether or not you should make the election is another question. If I hire someone in Utah to do sales for me over the phone, and he   works out of his home, am I required to register an LLC or file my   current one as a foreign entity in Utah? Yes, since you've established presence in Utah. You'll register your current LLC in Utah, no point creating another one. If my sales guy, or I, call businesses in, say, Florida, and sell a   few businesses our services for online work like maybe a website   design, etc. Are we required to file our LLC In Florida as either a   new LLC or a foreign one? No, you need to register where you (your company, including your employees or physical offices) are physically present. You don't need to register in any state you ship products or provide services to. If no-one of your company's employees is present in Florida and you don't have an office/rent a storage there - then you have no presence in Florida. If you actually go there to provide the services - then you do. In addition to asking an accountant, I would also ask a lawyer.  When exploring the same question for myself, I found that one of the benefits of incorporating or forming an LLC is that your personal assets are better protected.   Including asset protection, here are 5 reasons to incorporate: Initially, I thought that as I had so few assets, I should not be concerned.  I was glad I was able to do a free consult with a lawyer who advised me to look into forming an LLC.  (Ultimately, my planned business idea never panned out.  So, I never went the incorporation/LLC route.)  Hope this helps! "I'm assuming that when you say ""convert to S-Corp tax treatment"" you're not talking about actually changing your LLC to a Corporation. There are two distinct pieces of the puzzle here. First, there's your organizational form. Your state, which is where the business is legally formed and recognized, creates the LLC or Corporation. ""S-Corp"" doesn't come into play here: your company is either an LLC or a Corporation. (There are a handful of other organizational types your state might have, e.g. PLLC, Limited Partnership, etc.; none of these are immediately relevant to this discussion). Second, there's the tax treatment you receive by the IRS. If your company was created by the state as an LLC, note that the IRS doesn't recognize LLCs as a distinct organizational type: you elect to be taxed as an individual (for single member LLCs), a partnership (for multiple member LLCs), or as a corporation. The former two elections are ""pass through"" -- there's no additional level of taxation on corporate profits, everything just passes through to the owners. The latter election introduces a tax on corporate profits. When you elect pass-through treatment, a single-member LLC files on Schedule C; a multiple-member LLC will prepare a form K-1 which you will include on your 1040. If your company was created by the state as a Corporation (not an LLC), you could still elect pass-through taxation if your company qualifies under the rules in Subchapter S (i.e. ""an S-Corp""). States do not recognize ""S-Corp"" as part of the organizational process -- that's just a tax distinction used by the IRS (and possibly your state's tax authorities). In your case, if you are a single-member LLC (and assuming there are no other reasons to organize as a corporation), talking about ""S-Corp tax treatment"" doesn't make any sense. You'll just file your schedule C; in my experience it's fairly simple. (Note that this is based on my experience of single- and multiple-member LLCs in just two states. Your state may have different rules that affect state-level taxation; and the rules may change from year to year. I've found that hiring a good CPA to prepare the forms saves a good bit of stress and time that can be better applied to the business.)" You may want to start a company for a few reasons, the main one would be liability, you don't want your friend to drop a weight on a foot and sue you for millions taking your house away. You'd need to pay taxes on the income, that's after you pay all your expenses, bills, mortgage interest, insurance premiums (!), equipment depreciation. So it's going to be a lot less than you collect from your friends. Whether you incorporate or not you have to pay taxes on your income. If it's $200/year IRS may not notice that, if it's $20K a month it would be very hard to hide. If you pay your friends more than some amount (check the laws) you'd need to tell IRS about it (issue 1099-misc), then your friends must pay taxes on that income. As an LLC you are required to have a separate bank account (so you can't have one account and mix personal and business finances together as you could if you were a sole trader) - but there's no requirement for it to be a business bank account.  However, the terms and conditions of most high street bank personal current accounts specifically exclude business banking, so unless you could find one that would allow it, you'd have to open a business bank account. "I have done similar software work. You do not need an LLC to write off business expenses. The income and expenses go on Schedule C of your tax return. It is easy to write off even small expenses such as travel - if you keep records. The income should be reported to you on a 1099 form, filled out by your client, not yourself.  For a financial advisor you should find one you can visit with personally and who operates as a ""fee-only"" advisor. That means they will not try to sell you something that they get a commission on. You might pay a few $hundred per visit. There are taxes that you have to pay (around 15%) due to self-employment income. These taxes are due 4 times a year and paid with an ""estimated tax"" form. See the IRS web site, and in particular schedule SE. Get yourself educated about this fast and make the estimated tax payments on time so you won't run into penalties at the end of the year."