Should Travel Nurses Have an LLC? Pros, Cons, and When It Makes Sense

The LLC Question Every Travel Nurse Asks

“Should I form an LLC?” It is one of the most common financial questions in travel nursing forums, Facebook groups, and recruiter conversations. And unfortunately, it is also one of the most surrounded by misinformation.

The short answer: it depends entirely on your employment situation. If you are a W-2 employee working through a staffing agency, which the vast majority of travel nurses are, you almost certainly do not need an LLC. If you are a 1099 independent contractor or have significant side income, the calculation changes.

This guide gives you the full picture so you can make an informed decision rather than following advice that may not apply to your situation. But first, the critical disclaimer.

This is educational content, not financial advice. Before forming an LLC or making any business entity decisions, consult with a CPA and an attorney who understand your specific situation and state laws.

What Is an LLC and What Does It Do?

An LLC (Limited Liability Company) is a business structure that creates a legal separation between you as an individual and your business activities.

Liability protection. The primary purpose of an LLC is to shield your personal assets (home, car, savings) from business debts and lawsuits. If someone sues your business, they can go after business assets but generally cannot reach your personal property.

Tax flexibility. An LLC can be taxed as a sole proprietorship (default for single-member LLCs), a partnership, an S-Corporation, or even a C-Corporation. This flexibility lets you choose the tax treatment that saves you the most money.

How it differs from other structures. A sole proprietorship offers no liability protection. An S-Corp is a tax election, not a separate entity type, and can be applied to an LLC. A C-Corp is a fully separate tax entity with double taxation on profits. For most self-employed nurses, the LLC (potentially with an S-Corp election) is the right structure.

What an LLC does NOT do. An LLC does not automatically reduce your taxes. It does not let you write off personal expenses as business expenses. It does not protect you from personal malpractice if you are the one who committed it. And it does not change your employment relationship with a staffing agency.

When an LLC Makes Sense for Travel Nurses

You Work as a 1099 Independent Contractor

If you contract directly with facilities as an independent contractor rather than going through a staffing agency as a W-2 employee, an LLC provides meaningful benefits.

Liability protection. Your nursing work carries inherent liability risk. An LLC separates your business assets from your personal assets, adding a layer of protection beyond your malpractice insurance.

Tax benefits through S-Corp election. Once your self-employment income reaches a certain level (generally above $50,000 to $60,000 in net profit), electing to have your LLC taxed as an S-Corporation can save you thousands in self-employment taxes. More on this below.

Professional credibility. Some facilities and agencies prefer working with nurses who operate through a business entity. It signals professionalism and makes the contracting relationship cleaner from a legal perspective.

Business expense deductions. While sole proprietors can also deduct business expenses, an LLC creates a cleaner separation between personal and business finances, making tax filing and record-keeping more straightforward. For a detailed look at deductible expenses, see our tax deductions guide.

You Have Significant Side Income

Even if your primary travel nurse work is W-2, you may benefit from an LLC if you have substantial side income from sources like:

Per diem shifts you arrange independently
Consulting, precepting, or clinical education work
Speaking engagements or expert witness work
A blog, YouTube channel, social media content, or course creation
Any other self-employment income that generates meaningful revenue

When side income is small (a few hundred dollars here and there), the costs of maintaining an LLC typically outweigh the benefits. But once that income becomes consistent and substantial, the liability protection and tax benefits start to make real sense.

When an LLC Does NOT Make Sense

You Are a W-2 Employee (Most Travel Nurses)

This is the critical point that much of the online advice misses. If you work through a staffing agency as a W-2 employee, here is what is already in place without an LLC:

Your agency provides workers’ compensation and liability coverage. You are covered under the agency’s policies while working their contracts.

No self-employment tax savings. W-2 employees do not pay self-employment tax. The S-Corp election that saves 1099 workers money on self-employment tax provides zero benefit to W-2 employees.

Minimal tax benefits. W-2 employees cannot deduct unreimbursed business expenses on their federal tax return (this changed with the 2017 Tax Cuts and Jobs Act). Having an LLC does not restore those deductions.

The cost of maintaining an LLC outweighs any benefit. Between state filing fees, annual franchise taxes, registered agent fees, CPA costs for business tax filing, and the time spent on additional paperwork, you could easily spend $500 to $2,000 or more per year maintaining an LLC that provides you with no material advantage.

The bottom line: most W-2 travel nurses do NOT need an LLC. If someone is telling you otherwise without knowing your tax situation, they are giving you incomplete advice.

You Are a New Travel Nurse

If you are just starting out in travel nursing, forming an LLC should be low on your priority list. Focus on understanding your tax home, building your emergency fund, and getting your financial foundations in order. Once you understand how travel nursing works for you financially, you will be in a much better position to evaluate whether an LLC adds value.

LLC Tax Benefits Explained

S-Corp Election

This is the main tax benefit that makes an LLC worthwhile for 1099 nurses. Here is how it works.

As a sole proprietor or single-member LLC (taxed as a sole proprietorship by default), you pay self-employment tax (15.3 percent for Social Security and Medicare) on your entire net profit.

With an S-Corp election, you split your income into two parts: a reasonable salary (subject to payroll taxes) and distributions (not subject to self-employment tax). The savings come from the distribution portion.

Example: You earn $120,000 in net self-employment income. As a sole proprietor, you pay self-employment tax on all $120,000, which is roughly $18,360. With an S-Corp election, you pay yourself a reasonable salary of $70,000 (subject to payroll tax of about $10,710) and take $50,000 as a distribution (no self-employment tax). That is a savings of roughly $7,650 per year.

The “reasonable salary” requirement. The IRS requires that you pay yourself a salary that is reasonable for the work you do. You cannot pay yourself $30,000 and take $90,000 as distributions. The salary must reflect what you would earn doing the same work as an employee.

Income thresholds. The S-Corp election generally does not make financial sense until your net self-employment income exceeds $50,000 to $60,000 per year. Below that, the additional payroll processing costs, tax filing fees, and complexity eat into the savings.

Business Expense Deductions

An LLC does not give you any deductions you could not take as a sole proprietor on Schedule C. The same expenses are deductible either way: malpractice insurance, continuing education, travel between assignments (for 1099 workers), professional dues, and business-related supplies.

What an LLC does provide is a cleaner framework for separating business and personal finances. A dedicated business bank account, business credit card, and business bookkeeping system make tracking expenses much easier and reduce the chance of an IRS audit complication.

Costs of Forming and Maintaining an LLC

Before forming an LLC, understand the ongoing costs.

State filing fees: $50 to $500 or more depending on the state. Some states like California charge $800 per year just in franchise tax.

Registered agent fee: $100 to $300 per year if you use a service (required in most states).

CPA costs for business tax filing: $500 to $1,500 per year on top of your personal return, depending on complexity. A CPA experienced with travel nurses is worth the investment.

Business bank account: Usually free, but requires setup and maintenance.

Business insurance: If you are a 1099 contractor, you likely need your own professional liability insurance. $500 to $1,500 per year.

Payroll processing (for S-Corp): $200 to $500 per year through a payroll service.

Total estimated annual cost: $1,000 to $3,500 or more, depending on your state and situation. Your tax savings from the S-Corp election need to exceed these costs for the LLC to make financial sense.

How to Form an LLC (If You Decide To)

If you have evaluated your situation and determined an LLC makes sense, here is the process.

Step 1: Choose your state of formation. In most cases, form your LLC in your tax home state. Forming in Delaware or Wyoming for the low fees sounds appealing, but if you do not live or do business there, you will still need to register as a foreign LLC in your home state and pay fees in both.

Step 2: Choose a name and check availability. Search your state’s business name database to make sure your desired name is not taken.

Step 3: File Articles of Organization. This is the official formation document filed with your state’s Secretary of State office. You can do this yourself or use a formation service.

Step 4: Get an EIN. Apply for a free Employer Identification Number from the IRS at irs.gov. This takes about five minutes online.

Step 5: Open a business bank account. Keep business and personal finances completely separate. This is essential for maintaining the liability protection your LLC provides.

Step 6: Set up bookkeeping. Use accounting software to track income and expenses from day one. QuickBooks Self-Employed or Wave are popular options.

Step 7: Consult a CPA about S-Corp election timing. If your income justifies it, your CPA can help you file Form 2553 to elect S-Corp tax status. Timing matters, as the election generally needs to be filed within 75 days of the start of the tax year you want it to take effect.

Common LLC Mistakes

Forming an LLC as a W-2 employee with no benefit. This is the most common mistake. You spend money and time maintaining an entity that provides you no tax savings and no meaningful liability protection beyond what your agency already provides.

Choosing the wrong state. Forming in a “business-friendly” state when you live and work elsewhere means double registration and double fees with no advantage.

Not maintaining separation between personal and business finances. If you commingle funds (using your personal checking for business expenses and vice versa), a court can “pierce the corporate veil” and eliminate your liability protection. Keep it clean.

Electing S-Corp too early. If your self-employment income is below $50,000 to $60,000 per year, the cost of running payroll and filing additional tax returns exceeds the self-employment tax savings.

Forgetting annual filings. Most states require annual reports and franchise tax payments. Miss them and your LLC can be administratively dissolved, losing your liability protection.

Assuming an LLC eliminates all personal liability. An LLC protects you from business debts and certain lawsuits, but it does not protect you from your own professional negligence or malpractice. You still need malpractice insurance regardless.

Frequently Asked Questions

Does an LLC protect me from malpractice? Not from your own malpractice. If you personally commit a negligent act, you are personally liable regardless of your business structure. An LLC protects you from the business entity’s debts and from liability arising from employees’ or partners’ actions. Malpractice insurance is your real protection.

Can I form an LLC in a no-income-tax state even if I live elsewhere? Technically yes, but it is rarely beneficial. You will still need to register as a foreign LLC in your home state and comply with your home state’s tax laws. You end up paying fees in two states instead of one.

How much income do I need before an LLC makes sense? For the S-Corp tax savings to justify the costs, most CPAs recommend a minimum of $50,000 to $60,000 in net self-employment income per year. Below that, the additional expenses of maintaining the LLC and running payroll eat into any savings.

Can I have an LLC and still work W-2? Yes. Having an LLC does not change your W-2 employment status. But having an LLC for your W-2 work provides no benefit. The LLC would only be useful for separate 1099 or self-employment income.

Will an LLC change my tax home situation? Not directly. Your tax home is determined by your regular place of business, not by your business structure. However, an LLC registered in your tax home state can serve as additional documentation supporting your tax home claim. Discuss this with your CPA.

Key Takeaways

Most W-2 travel nurses do NOT need an LLC. The costs outweigh the benefits when you are already covered by agency insurance and cannot deduct unreimbursed business expenses
1099 nurses and those with significant side income should seriously consider one. The liability protection and potential S-Corp tax savings can be substantial
S-Corp election can save money, but only above certain income thresholds. Do not elect S-Corp until your net self-employment income consistently exceeds $50,000 to $60,000 per year
The costs of maintaining an LLC are real. State fees, CPA costs, and administrative time add up to $1,000 to $3,500 or more per year
Always consult a CPA before forming an LLC. This is not a decision to make based on Facebook group advice

Not sure whether an LLC is right for your situation? Talk to a CPA who specializes in travel nurse finances. The consultation fee is a fraction of what you could waste on an unnecessary LLC or miss out on by not forming one when you should.

Affiliate Placement Notes

LLC formation service affiliate links (LegalZoom, ZenBusiness, Northwest) in “How to Form” section
CPA referral link in key takeaways and FAQ
Business insurance affiliate link where liability is discussed
Business bank account affiliate link in the formation steps