Please see my answers below:

1.If your employer gives you Form 1099, you use Sch C of form 1040. If you get W-2, report as regular wage. Ask your employer what form they are going to give you.
2. You don't need to set up a company to do contract job. You can deduct all job related cost on tax return (sch C).Some people do set up a company to protect them from potential liabilities related to the job.
3. If you receive Form 1099, you are considered as self-employed.
4. If you receive Form 1099, you will need to pay double social security taxes but you can deduct the taxes as your expenses.