Good to hear back from you Steve. There are many advantages of being a limited liability company. Many things that you cannot deduct as an individual you can as a company. If you will be the only employee, you can be either an S Corporation or a limited liability company. Limited Liability companies provide more flexibility in terms of capital structure and types of profit participations than do S Corp. They are better suited to groups of more than one person. If it is just one person, I suggest an S Corp. The cost is much less because a limited liability company requires an operating agreement which is like a partnership agreement. This is a fairly sophisticated document. The S Corp requires that you create an corporation and make a subchaper S corporation. Tax wise it is treated like a sole proprietorship if there is one shareholder or a partnership if there is more than one person.
Delaware has the most developed corporate law in the U.S. However, since you live n CA and will work from there, incorporating in Delaware only adds an additional lawyer of administration and expense because you will have to qualify your corporation in CA. This means you will pay minimum fees in Delaware plus your normal tax in CA as that is where the income will be generated. I would incorporate in CA.
You will need a separate Tax ID for the corporation and a separate bank account.
As a corporation, you want to make sure that your base compensation from the company is increased to pay all the employment related taxes you normally would pay. Have all your payments from the company go into the corporate account. You will work for the corporation. Expenses you incur will be billed to your company and then charged for reimbursement to the overseas company.
Check with your accountant on the handling of the unemployment insurance. You have a number of additional benefits from being a separate corporation. For example you can deduct a portion of your home as a home office deduction. You can also create your own pension plan and save more than you can in a traditional IRA. You should discuss these and other opportunities with your accountant. He or she can help you set up your books of account and do your overall planning.
Also be sure to have a written agreement with your overseas company on all the terms of your contract, the period it will operate for, how it gets renewed and things such as bonus compensation. As you are not their employee you cannot rely on company policies for these issues.
I did not get the $40 bonus from the last time.
If you have any more questions, please get back to me.
This communication is not intended as legal advice. A local attorney should always be consulted for legal advice. No client/attorney relationship is intended or created by this communication.