I'm not an attorney, but I have done consulting on and off over the last dozen years. Hopefully this helps: 1. It's a good idea to incorporate - not only for

I'm not an attorney, but I have done consulting on and off over the last dozen years. Hopefully this helps: 1. It's a good idea to incorporate - not only for the individual protection, but for the ability to reduce taxable income as much as possible. C-Corp is probably best, but also most complex. You can start as an S-Corp and change down the road if you want. Many other reasons to do this as well. It does have its own set of expenses though - particularly, in CA you have to pay $800 per year just to exist. For the first several years, I worked as a sole proprietor. To mitigate personal risk as much as possible, I had certain clauses put in the contracts (and others removed). For example, no warranty for work - it is time and material, and liability could not exceed what was actually paid. I would also negotiate to have any insurance clauses removed - as I didn't carry any. 2. You should get insurance - General Business and E&O and if employees, workers comp. Many clients may require this. Note, however, that I never had it. If you have employees, it's almost a requirement. 3. Do pay estimated taxes quarterly. This will help reduce penalties and also help you not spend all your money and then be screwed when tax time comes. Set aside at least a third for this. 4. If forming a company that processes payrolls, get a payroll service like ADP. You screw up a payroll and the penalties are huge. It's worth the extra money to pay someone to get it right. 5. Make clear separation between personal and business expenses. Have a business account you use for business and don't mingle them together. 6. Get an accountant! Learn Quickbooks, or something to track income and expenses. Meet with accountant more frequently than April! Meet in Oct/Nov and get input on what you need to do before year end. With a C-Corp, any money left in the company is taxed as retained earnings and then taxed again when you pay yourself. You want to avoid this double-taxation and an accountant will help you figure it out (either through equipment purchases or payroll). Have fun, and good luck.