should I form a 1-man LLC?

Could this possibly save me in some sort of legal dispute with a future client?

Yes! If a company sues you now, they can take everything of yours. Your house, car, all your belongings. If you worked as an LLC, they could only take what the LLC owns, which probably won't be much.

Check out LLC on nolo.

As a programmer, here are your liabilities: 1. You bought something on credit, what if you can't pay it back. 2. Client believes you did not do the work they paid you to do. 3. The work you did damaged something.

If you start an LLC, I don't think anyone is going to give the company any credit without your personal guarantee or until you build up the corporation's credit. You personally won't have any personal protection until then.

A dispute over the work agreement will probably go against the corporation which protects your assets unless they think you personally commited fraud.

If you damage something with your code, that can be held against you personally; expecially if they think you have deeper pockets.

There will be some over-head to an LLC and some stricter scrutiny on you keeping your personal finances separate from the corporation. You'll need a good lawyer and accountant to do it right, but some of the online services may be enough.

Don't rule out other forms of organization, like a C Corp. I formed a 1-man C Corp about a decade ago, after considering LLCs, S Corps, and so on, because the tax benefits were better for me. It really wasn't any more trouble than forming an LLC in my opinion. While either an LLC or a C Corp can give you some legal protection, you also should also consider buying general liability insurance from an insurance company too; that could help you and your new business survive a lawsuit.