Considering Consulting

The simplest structure: sole proprietor

One generally does not need to form a corporation or LLC to begin consulting.
California specifically allows an individual to establish a sole proprietorship without registering with the Secretary of State. Business income and expenses are ultimately reported on her personal tax return, generally using Schedule C federally and the corresponding California reporting.
The client pays her one’s services. The client will generally issue a 1099-NEC when required, but importantly, report all consulting income whether or not one receives a 1099.
Report one’s income on Schedule C and, when net self-employment earnings are $400+, Schedule SE is generally required.

Recommended Actions:

Establish an EIN: even though a sole proprietor without employees may not strictly need one. California says a sole proprietor can obtain an EIN and may file a fictitious business name with the county.
Business checking account
Business credit card
Accounting system
Consulting contract
W-9: give a client a completed W-9
Quarterly estimated taxes

This is one of the areas I’d investigate before one starts working.
A self-employed person may establish a SEP-IRA, for example. The 2026 SEP contribution limit is up to $72,000, subject to the applicable percentage-of-compensation rules.
Depending on how much one actually earns, a Solo 401(k) could potentially be even more interesting because it can accommodate employee deferrals plus an employer contribution. Ask your CPA.
This could potentially be much more valuable than trying to squeeze another few thousand dollars of ordinary business deductions out of the business.

This is where I’d be particularly careful.

Michael WeiNovember 4, 2026