Should Travel Nurses Form an LLC? Complete Guide

Introduction: The LLC Question, Answered Thoroughly

“Should I form an LLC?” It is one of the most asked questions in every travel nursing Facebook group, forum, and recruiter conversation. And the answers range from “absolutely, you are leaving money on the table” to “it is a complete waste of money for W-2 nurses.” Both can be correct, depending on your situation.

The problem is that most travel nurses get advice from other travel nurses who do not fully understand the tax code, or from LLC formation companies that profit from selling you a service whether you need it or not. The result is a lot of nurses paying $500 to $2,000 per year to maintain an LLC that provides zero financial benefit, and other nurses missing out on legitimate tax savings because they dismissed the idea entirely.

This guide gives you the complete, nuanced picture. By the end, you will know exactly whether an LLC makes sense for your specific employment situation, what type of entity to form if it does, how much it costs, what it actually protects you from (and what it does not), and how to set it up properly.

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

What Is an LLC? A Quick Primer

An LLC (Limited Liability Company) is a business structure recognized by state law that creates a legal separation between you as an individual and your business activities. It is not a federal tax classification — it is a state-level entity that can then elect how it wants to be taxed at the federal level.

The two primary benefits:

Liability protection. An LLC shields your personal assets (savings, home, car) from debts and lawsuits related to your business. If someone sues your LLC, they can generally only go after business assets, not your personal ones.
Tax flexibility. A single-member LLC is taxed as a sole proprietorship by default (pass-through taxation). But you can elect to have your LLC taxed as an S-Corporation, which can significantly reduce self-employment taxes once your income reaches a certain level.

What an LLC is not:

It is not a magic tax deduction. Forming an LLC does not automatically lower your taxes.
It is not a shield against personal malpractice. If you personally commit malpractice, an LLC does not protect you from the consequences.
It is not a requirement for writing off business expenses. Sole proprietors can deduct business expenses on Schedule C without an LLC.
It does not change your employment classification. If you are a W-2 employee, forming an LLC does not make you an independent contractor.

For a shorter overview, see our LLC pros and cons summary.

W-2 Travel Nurses: You Probably Do Not Need an LLC

Let me be direct: if you are a W-2 employee of a staffing agency, which describes the vast majority of travel nurses, an LLC provides almost no benefit for your travel nursing income.

Why W-2 Nurses Do Not Benefit

You are not self-employed. An LLC is a business entity. When you work as a W-2 employee, you are not operating a business — you are an employee of someone else’s business (the staffing agency). The agency handles your taxes, provides workers’ compensation, carries liability insurance, and issues your W-2. An LLC has nothing to do with this arrangement.

You cannot deduct W-2 work expenses through an LLC. Since the Tax Cuts and Jobs Act of 2017, W-2 employees cannot deduct unreimbursed employee expenses on their federal tax return (the old miscellaneous itemized deduction on Schedule A was eliminated). Forming an LLC does not bring those deductions back. Your scrubs, stethoscope, continuing education, and licensing fees are not deductible against your W-2 income regardless of whether you have an LLC.

You already have liability coverage. As a W-2 employee, your agency’s general liability and workers’ compensation policies cover you during your assignments. Additionally, most travel nurses carry their own malpractice insurance, which provides personal professional liability coverage.

It costs money for no return. LLC formation fees range from $50 to $500 depending on the state. Annual maintenance fees (franchise taxes, registered agent fees, annual report filings) add $100 to $800 per year. If the LLC provides no tax benefit and no meaningful liability protection beyond what you already have, that is money thrown away.

The One Exception for W-2 Nurses

If you have significant side income beyond your W-2 travel nursing wages, an LLC may make sense for that side income — not for your travel nursing work. We cover this in detail below.

1099 Travel Nurses: An LLC Is Worth Serious Consideration

If you work as a 1099 independent contractor — contracting directly with facilities or through agencies that classify you as an independent contractor — the calculus changes completely.

As a 1099 contractor, you are self-employed. You operate a business. An LLC provides both meaningful liability protection and potential tax savings.

Liability Protection for 1099 Nurses

When you are self-employed, there is no employer standing between you and lawsuits. If a client facility sues you for breach of contract, if a business creditor comes after you, or if any business-related liability arises, your personal assets are at risk without an LLC.

An LLC creates a wall between your business and personal assets. Your personal savings, home, and car are generally protected from business debts and lawsuits (assuming you properly maintain the LLC — more on that below).

Critical limitation: An LLC does not protect you from personal malpractice claims. If you directly cause patient harm, you are personally liable regardless of your business structure. Malpractice insurance is your protection for clinical liability. The LLC protects against business liability — contract disputes, business debts, non-clinical lawsuits.

Tax Benefits Through S-Corp Election

This is where the real financial value of an LLC emerges for self-employed nurses.

The self-employment tax problem: As a 1099 contractor, you pay self-employment tax of 15.3% (12.4% Social Security + 2.9% Medicare) on your net self-employment income. On $100,000 of net income, that is $15,300 in self-employment tax alone, on top of your regular income tax.

The S-Corp solution: If you elect to have your LLC taxed as an S-Corporation, you can split your income into two categories:

Reasonable salary — You pay yourself a W-2 salary that is subject to FICA/self-employment taxes. This salary must be “reasonable” for the work you perform — the IRS will not accept a $20,000 salary for a nurse earning $120,000.
Distributions — Any profit above your salary is taken as an S-Corp distribution, which is not subject to self-employment tax. You still pay income tax on distributions, but you avoid the 15.3% SE tax.

Example:

Net self-employment income: $100,000
Without S-Corp: SE tax on $100,000 = $15,300
With S-Corp: Reasonable salary of $65,000, distribution of $35,000
- FICA on salary: $65,000 x 15.3% = $9,945 (split between employee and employer portions)
- SE tax on distribution: $0
- Annual tax savings: approximately $5,355

The higher your net income, the larger the potential savings. At $150,000 in net income, the savings can exceed $10,000 per year.

When S-Corp election makes sense: Most CPAs recommend considering S-Corp election when your net self-employment income consistently exceeds $50,000 to $60,000. Below that threshold, the tax savings typically do not outweigh the additional costs and complexity of S-Corp compliance (payroll processing, quarterly payroll tax filings, additional accounting fees).

For more on the W-2 vs. 1099 distinction, see our W-2 vs. 1099 guide.

Travel Nurses With Side Income: When an LLC Makes Sense

Many travel nurses earn income beyond their primary assignments. If you have significant self-employment side income, an LLC (potentially with S-Corp election) may be beneficial even if your travel nursing work is W-2.

Side Income That May Warrant an LLC

Telehealth nursing as an independent contractor ($20,000+/year)
Health coaching or consulting business ($15,000+/year)
IV hydration business or other clinical side business
Nursing content creation (blog, YouTube, social media) with substantial revenue
Tutoring or test prep for nursing students ($15,000+/year)
Medical staffing or nurse recruitment side business
Rental property income (though rental properties have their own entity structure considerations)

When the Numbers Justify an LLC for Side Income

The LLC itself provides liability protection at any income level. But the S-Corp tax election only makes financial sense above a certain income threshold.

Under $30,000 net side income: A sole proprietorship (with or without an LLC for liability protection) is usually sufficient. The SE tax savings from an S-Corp election are small and may be offset by the additional accounting costs.

$30,000 to $60,000 net side income: An LLC without S-Corp election provides liability protection. S-Corp election may or may not save money depending on your specific expenses and the cost of payroll processing.

Over $60,000 net side income: S-Corp election typically provides meaningful tax savings. The payroll and accounting costs ($1,500 to $3,000/year) are justified by SE tax savings of $3,000 to $10,000+.

State Filing Requirements and Costs

LLC rules and costs vary significantly by state. Here is what you need to know.

Formation Costs by State (Selected Examples)

State	Formation Fee	Annual Fee/Franchise Tax	Notes
Wyoming	$100	$60/year	Popular for out-of-state filers; low cost, strong privacy
New Mexico	$50	$0	No annual report or fee
Texas	$300	No franchise tax below $2.47M revenue	No state income tax
California	$70	$800/year minimum franchise tax	Expensive; avoid if possible
Florida	$125	$138.75/year	No state income tax
New York	$200	$25/year + publication requirement ($500-$2,000)	Expensive publication requirement
Nevada	$75	$350/year + $200 business license	No state income tax

Where to Form Your LLC

General rule: form your LLC in the state where you conduct business. For most travel nurses with side income, this is your tax home state. Forming in a “business-friendly” state like Wyoming or Delaware while living and operating in a different state often does not save money, because you still need to register as a foreign LLC in the state where you do business, paying fees in both states.

Exceptions: If your side business is entirely online with no physical presence in any specific state, forming in a low-cost state like Wyoming or New Mexico may be advantageous. Consult a business attorney for your specific situation.

Ongoing Compliance Requirements

An LLC is not a one-time filing. Ongoing requirements typically include:

Annual report/statement of information filing with your state (varies by state; some are biennial)
Franchise taxes (in states that impose them)
Registered agent — a person or service designated to receive legal documents on behalf of your LLC. Required in every state. Services cost $50 to $300/year.
Separate bank account — commingling personal and business funds can “pierce the corporate veil” and eliminate your liability protection
Operating agreement — a document outlining the LLC’s ownership and operating procedures. Not required by every state, but essential for maintaining the legal separation between you and your LLC
Proper documentation — minutes, resolutions, and records demonstrating that you treat the LLC as a separate entity

Complete Cost Analysis: Is an LLC Worth It?

Annual Costs of Maintaining an LLC

Expense	Low End	High End
State annual fee/franchise tax	$0	$800+
Registered agent service	$50	$300
CPA/tax preparation (additional complexity)	$300	$1,500
Payroll processing (if S-Corp)	$300	$1,200
Bookkeeping software	$0	$360
Business insurance (if applicable)	$300	$1,500
Total annual cost	$950	$5,660

Break-Even Analysis

For the LLC to be financially worthwhile, the tax savings and/or liability protection value must exceed these annual costs.

S-Corp tax savings calculation:

Net self-employment income: $X
Reasonable salary: approximately 60-70% of $X
Distribution (not subject to SE tax): approximately 30-40% of $X
SE tax savings: Distribution amount x 15.3%

At $80,000 net self-employment income with a $55,000 salary and $25,000 distribution, SE tax savings are approximately $3,825. If your annual LLC costs are $2,000, you save approximately $1,825 net. At higher income levels, the savings grow proportionally.

Liability protection value: This is harder to quantify but very real. One business-related lawsuit without an LLC could cost you everything. The $1,000 to $2,000 annual cost of an LLC is cheap insurance against that risk.

How to Set Up an LLC: Step by Step

If you have determined that an LLC makes sense for your situation, here is how to set one up.

Step 1: Choose Your State

Form in the state where you conduct business (typically your tax home state). Check your state’s LLC filing requirements and costs.

Step 2: Choose a Name

Your LLC name must be unique in your state and typically must include “LLC” or “Limited Liability Company.” Check availability through your state’s Secretary of State website.

Step 3: File Articles of Organization

Submit your Articles of Organization (called Certificate of Formation in some states) to your state’s Secretary of State office. This is the document that officially creates your LLC. Filing can usually be done online.

Step 4: Get an EIN

Apply for an Employer Identification Number (EIN) from the IRS. This is free and takes minutes online at irs.gov. You need this for opening a business bank account and filing taxes.

Step 5: Draft an Operating Agreement

Even if your state does not require one, create an operating agreement that outlines ownership structure, management responsibilities, profit distribution, and dissolution procedures. This document supports the legal separation between you and your LLC.

Step 6: Open a Business Bank Account

Open a dedicated checking account in the LLC’s name. All business income should be deposited here, and all business expenses should be paid from here. Never commingle personal and business funds.

Step 7: Obtain Necessary Insurance

If you are operating a clinical side business, get appropriate liability insurance for that business. Your personal malpractice insurance may not cover business activities outside of your W-2 employment.

Step 8: Elect S-Corp Taxation (If Applicable)

If you want S-Corp tax treatment, file IRS Form 2553. This must be filed within 75 days of forming your LLC or within 75 days of the start of the tax year in which you want the election to take effect. Late elections are sometimes possible with reasonable cause.

Step 9: Set Up Payroll (If S-Corp)

As an S-Corp, you must run payroll for yourself, withhold taxes, and file quarterly payroll tax returns. Most S-Corp owners use a payroll service to handle this. Budget $300 to $1,200 per year for payroll processing.

Common LLC Myths Travel Nurses Believe

Myth: “An LLC lets me write off my scrubs, stethoscope, and CE courses”

Reality: If you are a W-2 employee, you cannot deduct these expenses on your federal return regardless of whether you have an LLC. The LLC does not create deductions that do not exist. If you are a 1099 contractor, you can deduct these expenses on Schedule C — but you can do that without an LLC too (as a sole proprietor).

Myth: “An LLC protects me from malpractice lawsuits”

Reality: An LLC does not protect you from claims arising from your own professional negligence. If you personally cause patient harm, you are personally liable. That is what malpractice insurance is for. The LLC protects against business liability (contract disputes, business debts), not personal professional liability.

Myth: “Every travel nurse should have an LLC”

Reality: The vast majority of travel nurses are W-2 employees who gain no meaningful benefit from an LLC for their nursing income. An LLC only makes sense for 1099 contractors or nurses with significant self-employment side income.

Myth: “I should form my LLC in Wyoming/Delaware/Nevada for tax benefits”

Reality: Unless your business is entirely online with no physical presence in your home state, you will still need to register and pay fees in the state where you conduct business. You end up paying fees in two states instead of one. Form in your home state unless you have a specific, attorney-advised reason not to.

Myth: “An LLC makes me a business owner, so I can deduct personal expenses”

Reality: Business deductions must be for ordinary and necessary business expenses. Personal meals, personal travel, your Netflix subscription, and your car payment are not business expenses just because you have an LLC. Improperly claiming personal expenses as business deductions is tax fraud and can result in penalties, interest, and legal consequences.

When to Consult a Professional

Do not rely solely on this guide or on advice from travel nursing forums. Consult the following professionals before making a decision:

A CPA or tax professional who understands both travel nursing tax law and business entity taxation. They can run the numbers specific to your income, expenses, and state to determine if an LLC with S-Corp election actually saves you money. See our CPA guide for help finding the right tax professional.

A business attorney who can advise on liability protection, operating agreement drafting, and state-specific compliance requirements.

Your recruiter or agency if you have questions about how an LLC interacts with your employment arrangement. Some agencies will contract with nurse-owned LLCs, while others only work with individual W-2 employees.

Key Takeaways

W-2 travel nurses employed by staffing agencies almost never benefit from forming an LLC for their nursing income
1099 independent contractor travel nurses should seriously consider an LLC for liability protection and potential S-Corp tax savings
S-Corp election typically saves money when net self-employment income exceeds $50,000 to $60,000 per year
Travel nurses with significant side income ($30,000+ per year) may benefit from an LLC for that income, even if their travel nursing work is W-2
LLC formation and maintenance costs $950 to $5,660 per year depending on your state and whether you elect S-Corp taxation
An LLC does not protect against personal malpractice claims — that is what malpractice insurance is for
Form your LLC in the state where you conduct business, not in a “business-friendly” state unless specifically advised by an attorney
Always consult a CPA and attorney before forming a business entity — the wrong decision can cost more than doing nothing

Frequently Asked Questions

Do W-2 travel nurses need an LLC?

No. If you are a W-2 employee of a staffing agency, an LLC provides no meaningful tax benefit for your travel nursing income. Your agency handles your employment taxes, provides liability coverage, and your W-2 employee expenses are not deductible on your federal return. The only reason a W-2 nurse might form an LLC is for significant side income earned outside of their agency employment.

How much does an LLC save on taxes?

It depends on the type and amount of income. An LLC by itself does not save taxes — it is the S-Corp tax election that creates savings by reducing self-employment tax. At $80,000 in net self-employment income, S-Corp election typically saves $3,000 to $5,000 per year in self-employment taxes. At $120,000, savings can exceed $7,000 to $10,000 per year. Subtract the cost of payroll processing, additional accounting fees, and state compliance costs to determine your net savings.

Can I use an LLC to deduct travel nursing expenses?

No, not if you are a W-2 employee. The Tax Cuts and Jobs Act of 2017 eliminated the deduction for unreimbursed employee expenses for W-2 workers. Forming an LLC does not override this. If you are a 1099 contractor, you can deduct business expenses on Schedule C, but you can also do this as a sole proprietor without an LLC.

What is the difference between an LLC and an S-Corp?

An LLC is a legal business entity formed at the state level. An S-Corp is a federal tax classification. They are not the same thing, but they can work together. You form an LLC (state entity), then elect to have it taxed as an S-Corporation (federal tax election using IRS Form 2553). This gives you both the liability protection of an LLC and the self-employment tax reduction of S-Corp taxation.

Should I form an LLC before starting travel nursing?

There is no reason to form an LLC before or during travel nursing if you plan to work as a W-2 employee of staffing agencies, which is the standard arrangement. If you plan to work as a 1099 independent contractor or start a side business, consult a CPA and attorney first to determine the best timing and structure for your specific situation.

Affiliate Placement Notes: LLC formation service (LegalZoom, ZenBusiness, Northwest Registered Agent) referral links in the setup section. CPA matching service referral in the professional consultation section. Business insurance comparison tool in the insurance section. Bookkeeping software (QuickBooks, Wave, FreshBooks) referral in the ongoing compliance section.