*****Get legal advice from a lawyer experienced with the IRS and LLC's.**** Be sure to explain the entire situation and the fact it's multi state commerce and there is a transaction over a certain amount the IRS needs to be made aware of. Obviously you are responsible for taxes on the entire amount due to a paper trail even if you split with someone and paid them in cash. The cash recipient must also tell the IRS about the money. You might have to reveal who your cash partner is. I would hate to go the LLC route and not say anything about the cash partner only to have it come back on you later and having to explain it all to the IRS why you did not tell them. They have no sense of humor and Federal laws exist that can jail you.