Legal, Money, and the Contract

The legal side of this business is light, which is a gift, and the parts that matter are unglamorous: the right business form, a real written agreement, and a working knowledge of self-employment tax, because that last one silently rewrites your economics. None of this is legal or tax advice; it is what solo VAs routinely handle, and where to spend real attention.

Business form

Start as a sole proprietor. It is the default, it is free, and nothing about your first pilot requires an LLC. You report business income on your personal return with a Schedule C. Get an EIN from the IRS site directly, it is free and takes minutes, and it lets you skip handing your Social Security number to every client's onboarding form. Never pay a reseller for a "free" EIN.

Form an LLC when there is something to protect or the income is established. The filing fee runs thirty-five to five hundred dollars depending on state, plus occasional annual reports. The LLC mainly buys separation between business liabilities and your personal assets; for a services business with no premises and no physical risk, it is a judgment call worth a conversation with an accountant once real money is moving, not a prerequisite. Some VAs also elect S-corp taxation later, at higher incomes, to soften self-employment tax. Later means later; the paperwork overhead punishes small balances.

What matters more than the form, today: a separate business bank account. The moment money moves, personal and business finances must not share an account. It halves your bookkeeping pain, it keeps the home office deduction clean, and it is the line between a business and a hobby in an audit.

The service agreement

Work without a written agreement exactly once, as a favor, never again. Your agreement does five jobs: it defines the scope so scope creep has a boundary, it sets payment so you are prepaid rather than chasing, it fixes communication expectations so the always-on trap has walls, it protects confidentiality both directions, and it records that you are an independent contractor, not an employee.

The clauses that earn their keep:

| Clause | What it does for you | |---|---| | Scope of services | The task list, in their words where possible. Everything outside it triggers the overage or swap conversation, not an argument. | | Retainer terms | Prepaid monthly, due on the first, non-rolling into next month's hours. Unused capacity does not bank up unless you say so. | | Overage rate | The hourly rate for work past scope, agreed while everyone is happy. | | Response window | Your promised availability hours and reply speed. This is what they are buying; define it or it becomes "always." | | Term and termination | Month-to-month with thirty days' notice, either side. Month-to-month sounds scary and is not: retention comes from delivery, not lock-in. | | Confidentiality | Mutual. You see their business; they see how you work. | | Contractor status | You control how and when work is done. Protects your IC status and theirs. | | Data and access | What access you hold, that you follow their security rules, and same-day revocation at offboarding. |

A template for this agreement is in the worksheet pack, and a review by a lawyer licensed in your state costs a fraction of one client month. Worth it the first time you sign anything longer than a pilot.

Taxes, the honest version

Self-employment tax is 15.3 percent of net earnings, and you must file once net earnings pass four hundred dollars for the year. This is the employer and employee halves of Social Security and Medicare joined into one line that used to be split invisibly with an employer.

If you expect to owe a thousand dollars or more at filing, you pay estimated taxes quarterly. The safe harbors that keep penalties away: pay at least ninety percent of this year's tax, or a hundred percent of last year's, whichever is smaller. The operating rule from The Honest Money stands: sweep a quarter to a third of every payment into the tax account the day it lands, and the quarterly deadlines become administrative.

On forms from clients: through 2025, clients issued a 1099-NEC once they paid you six hundred dollars or more in a year; for 2026 payments the reporting threshold rises to two thousand dollars. The rule that never changed and never will: all business income is taxable whether any form arrives or not. Track everything.

The deductions are genuinely useful to a home-based service business. The simplified home office method writes off five dollars per square foot of exclusive-use space, up to three hundred square feet, a maximum of fifteen hundred dollars a year, without depreciation paperwork. Software, the business share of internet and phone, professional insurance if you carry it, your accountant: all ordinary business expenses. The word doing the heavy lifting in home office is "exclusive"; the kitchen table does not qualify, a dedicated corner does.

One benefit nobody warns you about: health insurance is now your problem, and it is solvable, with real trade-offs. Coverage options after leaving employment is the dedicated guide for that decision, and it belongs on your list for week one if you are leaving an employer plan.

Paperwork done, the business is real on paper. What makes it real in your bank account is pricing.