You Just Formed an LLC. Now What? A First-Year Guide for New Business Owners in Maryland and Virginia

Business Owners
Written By Danni Shen, CFA®

Last reviewed: October 2026 · Educational, not individual tax or legal advice · By Danni Shen, CFA®

A new LLC owner needs to get four things right in the first year: understand the three ways a small business can be set up and taxed (sole proprietorship, LLC, or an LLC taxed as an S corp), know the date the S corp choice is due (2 months and 15 days into the tax year, which is March 15 for most owners), know why you would stay a plain LLC or elect S corp, and keep clean books from day one. A good CPA will walk you through all of it. If you do not have one yet, this guide is the minimum to know, with the dates for 2026 and 2027.

Congratulations. Now give yourself a year or two.

Congratulations on becoming a business owner. It is a real change, and it usually takes one to two years to get used to the new lifestyle. Your paycheck no longer arrives on its own. Nobody withholds your taxes. Your calendar is yours, which can mean more flexibility, more stress, or both in the same week.

Either way, you now have opportunities you did not have as an employee, and challenges you did not have either. Most of the challenges in year one are not about your product or your customers. They are about structure, dates, and paperwork that nobody taught you.

Owners who have been through it say the same thing. In an October 2026 r/smallbusiness thread asking what owners wish they had known about finance before starting (Reddit), the top-voted answer was to find a reputable accountant before doing anything else, from an owner whose first accounting firm was no help and hard to reach with questions. The replies filled in the cost: an accountant who misses deductions or creates compliance problems you discover only when they are expensive, and more than one owner who had amended several years of returns to fix it. One commenter put it in five words: "Taxes will eat you alive." Others listed structure, bookkeeping, cash flow, and paying yourself first.

That matches what I see. Finding a good CPA is the most important hire you will make early on, and I wrote about the three things I look for in one. But many new owners do not have a CPA in the first few months, and even when you do, you will ask better questions if you know the basics. Here they are.

1. Know your three options: sole proprietorship, LLC, or S corp

People talk about these as three choices on one menu. They are really two different decisions. The first is legal: do you have a company that is separate from you? The second is tax: how does the IRS treat that company's profit? The SBA puts it this way: an S corp is better understood as a tax status than a business structure, and an LLC can choose to be taxed as one (SBA, Choose a business structure).

Sole proprietorship LLC (default tax treatment) LLC taxed as an S corp
What it is You, doing business in your own name. No state filing creates it. A legal entity you form with the state. The same LLC, plus a tax election on IRS Form 2553.
Personal liability You are personally liable for the debts and obligations of the business. Your personal assets are generally protected from business debts and lawsuits. Same as the LLC. The election changes tax, not liability.
Federal tax return Schedule C on your personal return. One owner: Schedule C. Two or more owners: a partnership return, Form 1065. A separate business return, Form 1120-S, plus a K-1 to you.
Tax on the profit Income tax plus self-employment tax on all of the net profit. Same as a sole proprietorship. Payroll tax on your W-2 salary only. The rest of the profit carries income tax but no self-employment tax.
How you pay yourself Owner's draw. No paycheck. Owner's draw. No paycheck. A W-2 salary through payroll first, then distributions.

Two things in that table surprise new owners.

First, forming an LLC did not change your taxes. A single-member LLC is taxed exactly like a sole proprietorship unless you elect otherwise (IRS, Single member LLCs). What you bought with the LLC is the liability wall.

Second, the liability wall has limits. An LLC does not protect you from your own professional mistakes, from a loan or lease you signed for personally, or from unpaid payroll taxes. It also weakens if you treat the company's bank account as your own wallet, which is one more reason the bookkeeping section below matters. An LLC is not a substitute for business insurance. And if you sell services, the other half of protecting yourself is a signed contract and a written estimate the client accepts before the work starts. The disputes owners in that thread wished they had avoided were about scope and price, not the law. Ask an attorney and an insurance agent what your line of work needs.

If your spouse works in the business

This is one of the most common first-year questions, and the answer depends on which role your spouse has.

  • Your spouse is your employee. The wages go through payroll like any employee's. In a sole proprietorship or single-member LLC, a spouse's wages are subject to income tax withholding and Social Security and Medicare taxes, but not federal unemployment (FUTA) tax (IRS, Married couples in business). The work has to be real and the pay has to fit the work. In return your spouse builds their own Social Security record and can be covered by your Solo 401(k), which the IRS describes as a plan for a business owner with no employees, "or that person and his or her spouse" (IRS, One-participant 401(k) plans).
  • Your spouse is a co-owner of the LLC. In Maryland, Virginia, and DC, an LLC owned by two spouses is a partnership for tax purposes. That means a separate Form 1065 every year, due March 15, and a K-1 for each of you. The "qualified joint venture" shortcut that lets married co-owners skip the partnership return is not available when the business is held in an LLC (same IRS page). Adding your spouse's name to the LLC is a legal and tax decision, not a formality.
  • You elect S corp and you both work in it. You each take a reasonable W-2 salary through the same payroll.

Payroll, and the payroll dates

You need payroll the moment you have an employee, and under an S corp election the first employee is you. Payroll is not a year-end entry your CPA makes in March. Wages count for the year in which they are actually paid, so an S corp owner's salary for 2026 has to run through payroll by December 31, 2026, and the salary for 2027 by December 31, 2027. So do the employee contributions to a Solo 401(k).

How often you run payroll is up to you. An owner-only S corp does not need a paycheck every two weeks. A common choice is quarterly: a $60,000 salary paid as $15,000 on March 31, June 30, September 30, and December 31, 2027. Some owners run payroll twice a year, or once a year in December, to keep the payroll service cost down. Fewer payrolls mean fewer deposits and less to reconcile, as long as the last one runs before the year ends.

Using the quarterly example, here are the federal dates for 2027 (IRS, Employment tax due dates; when a date falls on a weekend or holiday it moves to the next business day):

  • Deposits. Each payroll creates a tax deposit: the Social Security and Medicare tax (both halves) plus the income tax you withheld from your own paycheck. For the four paychecks above, the deposits are due April 15, July 15, October 15, 2027, and January 18, 2028 (January 15 is a Saturday and January 17 is a holiday). In the months with no payroll there is nothing to deposit. One exception: if the taxes from a single payroll reach $100,000, the deposit is due the next business day, which matters only for a very large salary paid once a year.
  • Form 941, the quarterly payroll return, is due after every quarter even if you ran only one payroll in it: April 30, 2027, August 2, 2027 (July 31 is a Saturday), November 1, 2027 (October 31 is a Sunday), and January 31, 2028.
  • Forms W-2 for 2027 wages go to you and to the Social Security Administration, and Form 940 for federal unemployment tax is filed, by January 31, 2028. (For 2026 wages the date is February 1, 2027, because January 31, 2027 is a Sunday.)

Before the first paycheck you also register with your state for withholding and unemployment insurance accounts. A payroll service handles the deposits and filings for you. Most owners should use one.

2. When do you have to choose S corp status?

The S corp election is made on Form 2553, and it has a deadline that catches new owners every year (IRS Form 2553 instructions).

  • To be an S corp for a full calendar year, file no more than 2 months and 15 days after the year begins, or any time during the year before. To be an S corp for all of 2027, file any time in 2026 or by March 15, 2027.
  • To be an S corp from the day a new LLC starts, the clock begins on the earliest of the day the company first had owners, first had assets, or began doing business. The IRS example: a company that starts on November 8 has until January 22.
  • If you missed it, the IRS allows a late election within 3 years and 75 days of the intended effective date when you have reasonable cause and meet the other conditions. That is a conversation for your CPA, but do not assume the door is closed.

An LLC that files Form 2553 on time does not need to file the separate entity classification form (Form 8832).

You do not have to choose in your first year. Many owners run the first year as a plain LLC, see what the profit really is, and decide in the fall whether to elect for the following January 1. If you are reading this in the last quarter of the year, this is the right time: project your profit, have the conversation, and if the answer is yes, set up payroll so the first paycheck runs in January.

3. Why stay an LLC, and why elect S corp?

The reason to elect S corp: your own W-2

As a sole proprietor or default LLC owner, all of your net profit is subject to self-employment tax of 15.3% (12.4% Social Security on the first $184,500 of 2026 earnings, plus 2.9% Medicare), on top of income tax.

Under an S corp election you become an employee of your own company and get your own W-2. Payroll tax applies to that salary. The profit left after your salary passes through to you as a distribution, and that part is not subject to self-employment tax.

A hypothetical with 2026 figures: on $120,000 of profit, a default LLC owner pays about $16,955 of self-employment tax. As an S corp paying the owner a $60,000 salary, the payroll tax is $9,180. The gap is about $7,800 a year.

That gap is the headline. It is not the answer, because three things come out of it:

  • The salary has to be reasonable. The IRS expects pay that fits your duties, hours, and experience, and it has said that a K-1 or a 1099 is not a substitute for a W-2 (IRS Fact Sheet 2008-25). You cannot pay yourself $10,000 and take the rest as distributions.
  • The S corp costs money to run. Payroll service plus the separate Form 1120-S return typically add about $2,500 a year.
  • The 20% qualified business income deduction shrinks, because W-2 salary does not count as qualified business income.

I worked through the full math in LLC vs S Corp in Maryland and Virginia. The short version: the election starts to make sense at about $60,000 of profit, becomes reliably worthwhile above roughly $80,000 to $100,000, and the salary decision matters more than the structure.

A W-2 does one more thing. It is what your retirement plan contributions are measured against. The employer share of a SEP IRA or Solo 401(k) in an S corp is a percentage of your W-2 pay, so the salary you set also sets how much you can put away. Our Solo 401(k) and SEP IRA guide covers that link.

The reasons to stay a plain LLC

  • Your profit is under about $60,000, or you do not yet know what it will be. A first year with a loss or a thin profit has little self-employment tax to save.
  • You want it simple. No payroll, no second tax return, no quarterly payroll filings.
  • You still have a full-time W-2 job. Wages from your employer count toward the $184,500 Social Security base first, so if your salary already uses up most of it, the business profit mainly owes the 2.9% Medicare part, and there is much less for an S corp to save.
  • An owner is not a US citizen or resident alien. That owner cannot hold S corp shares.
  • The business is in the District of Columbia, which does not honor the S election.

4. Bookkeeping: the habits that pay for themselves

Bookkeeping is important, and it is the part new owners put off. Every decision above (the S corp election, your salary, your estimated taxes, your retirement contribution) depends on knowing your profit before the year ends. You cannot know it from a shoebox in March.

One owner in the thread passed on what a business coach had told him: running the business is your job, and it takes close to half your time. Bookkeeping is the part of that half most owners try to squeeze into evenings, and it is the first thing to hand off once you can afford a bookkeeper. Hand it off, but do not walk away from it. A bookkeeper does the entries. You still read the monthly report.

The good news is that good bookkeeping is mostly habits, not skill.

  1. Open a business checking account in the first week. The IRS calls this one of the first things to do when you start a business (IRS Publication 583). Every dollar of business income goes in. Every business expense comes out of it or off one business credit card. This is also what keeps the LLC's liability wall standing.
  2. Do not pay personal bills from the business account. Pay yourself with a transfer to your personal account, label it as an owner's draw (or run it as payroll in an S corp), and pay the groceries from there.
  3. Use bookkeeping software from the start, connected to the bank account and the card. A spreadsheet works for a few months. It stops working sooner than you think.
  4. Put 30 minutes on the calendar every month. Categorize the transactions, reconcile to the bank statement, and read the report. Another thread asked how detailed a small business's financials really need to be, and the answer that led it was the right one: detailed enough to answer three questions fast. Am I profitable? Where is cash getting stuck? What is driving costs up or down? If your monthly report answers those three, it is detailed enough for year one. A year of 30-minute sessions costs far less than a year-end cleanup.
  5. Keep the paper, digitally. Photograph receipts when you get them. Save invoices, bills, and bank statements. For business driving, keep a log with the date, destination, purpose, and miles.
  6. Move tax money out of sight. Open a separate savings account and move a set share of every deposit into it. Many owners start at 25% to 30% of profit and adjust with their CPA. That account pays your quarterly estimates.
  7. Get a Form W-9 before you pay any contractor. For payments made in 2026 and later, you file a Form 1099-NEC for each contractor you pay $2,000 or more in the year for services. The threshold was $600 through 2025 (IRS, Form 1099-NEC and independent contractors).
  8. Keep records at least three years after you file, and payroll records at least four years (IRS, How long should I keep records).

Your 2027 calendar (quarterly payroll)

For an LLC formed in 2026, 2027 is the first full year. The same dates repeat every year; the ones below are already moved to the next business day where 2027 puts them on a weekend or holiday.

Date What is due
January 15, 2027 Fourth 2026 estimated tax payment
February 1, 2027 For 2026: W-2s to employees and the SSA; 1099-NECs to contractors and the IRS; Form 941 for the fourth quarter; Form 940 (January 31 is a Sunday)
March 15, 2027 Form 2553 to be an S corp for 2027; Form 1120-S and Form 1065 returns for 2026
April 15, 2027 2026 personal return with Schedule C; first 2027 estimated tax payment; Maryland annual report; payroll tax deposit for March wages
April 30, 2027 Form 941 for the first quarter
June 15, 2027 Second 2027 estimated tax payment
July 15, 2027 Payroll tax deposit for June wages
August 2, 2027 Form 941 for the second quarter (July 31 is a Saturday)
September 15, 2027 Third 2027 estimated tax payment
October 15, 2027 Payroll tax deposit for September wages
November 1, 2027 Form 941 for the third quarter (October 31 is a Sunday)
Last day of your formation month Virginia LLC annual registration fee
December 31, 2027 Last day to run 2027 S corp owner salary and Solo 401(k) employee contributions through payroll
January 18, 2028 Fourth 2027 estimated tax payment; payroll tax deposit for December wages (January 15 is a Saturday, January 17 a holiday)
January 31, 2028 For 2027: W-2s, 1099-NECs, Form 941 for the fourth quarter, Form 940

The payroll deposit rows assume the quarterly payroll example from section 1. If you run payroll on a different schedule, the deposit for each month you paid wages is due on the 15th of the next month.

The questions almost every new owner asks

These come up in nearly every first conversation, and they fill small business forums every week under titles like "what's one money mistake every new business owner should avoid" and "what financial lesson did your business teach you the hard way."

Do I need an EIN?

A single-member LLC with no employees is not required to have one, but in practice you will want it. Banks ask for it, clients ask for it on a W-9 so you do not hand out your Social Security number, and you must have one for payroll or an S corp election. It is free and takes minutes on the IRS website. The IRS warns owners about websites that charge for one: "You never have to pay a fee for an EIN" (IRS, Get an EIN).

How do I pay myself?

In a sole proprietorship or default LLC, you take an owner's draw: a transfer from the business account to your personal account. It is not a paycheck, nothing is withheld, and it is not a deduction. You are taxed on the business's profit whether you take the money out or leave it in. Partners are not employees either and should not receive a W-2 (IRS, Paying yourself). Only under an S corp election do you get a paycheck.

Do I have to pay taxes every quarter?

Probably. With no employer withholding for you, the IRS expects estimated payments if you will owe $1,000 or more for the year. The due dates are April 15, June 15, September 15, and January 15. You generally avoid an underpayment penalty if you pay at least 90% of this year's tax or 100% of last year's (110% if last year's adjusted gross income was over $150,000) (IRS, Estimated taxes). Your state has its own estimated payments on a similar schedule.

If you or your spouse still has a W-2 job, there is a simpler route: raise the withholding at that job with a new Form W-4 to cover the tax on the business profit.

Can I deduct what I spent before the business opened?

Yes, within limits. You can elect to deduct up to $5,000 of start-up costs and up to $5,000 of organizational costs in your first year. Each $5,000 is reduced once that category of costs passes $50,000, and whatever is left is deducted over time (IRS Publication 583). The habit that makes this work: start tracking expenses on the day you start spending, not the day the LLC is approved.

My LLC made no money this year. Do I still file?

Your state filing is due no matter what. A Maryland LLC files an annual report with the State Department of Assessments and Taxation by April 15 each year, starting the year after it is formed, with a $300 fee. Skip it and the company falls out of good standing and can eventually be forfeited (Maryland SDAT). A Virginia LLC pays a $50 annual registration fee by the last day of the month in which it was formed, and is canceled if the fee stays unpaid three months past the due date (Virginia SCC).

On the federal side, an LLC that has elected S corp status files Form 1120-S every year, even a year with no activity. A single-member LLC with start-up expenses and no income usually still reports them on Schedule C so the loss is not wasted. Ask your preparer before you decide a year "does not count."

Which number should I watch?

Owners argue about this one. When r/smallbusiness asked it directly (Reddit, August 2026), the most-upvoted answer was cash flow, defined the way an owner feels it: how much cash the business can send to your personal account each month, or what is left in the bank at month end after everything is paid. The second camp said profit, the bottom line, because that is why you are in business. A few experienced owners reconciled the two: most start by watching cash, then shift to gross margin once there is breathing room, because revenue can look fine while margin quietly slips. Several named the expense line as the number they investigate every month, and one professional services owner used revenue per employee, checked quarterly, as the gate before any hire.

My answer for year one is two numbers. Profit year to date, from your books, tells you whether the business works. Months of fixed costs covered by the cash in the business account tells you whether it survives long enough to find out. Revenue is the number people quote at dinner. It is the least useful of the three. And one commenter in that thread admitted running personal expenses through the business account to show a loss and owe no tax. That is not a strategy. It is the bookkeeping failure from section 4, it weakens the LLC's liability wall, and it is exactly what an examiner looks for.

Can I get a business loan in my first year?

Usually not on the business's own record, and funding is one of the most common struggles new owners post about. Most lenders want to see one to two years of business tax returns, and nearly every small business loan or line of credit requires you to sign for the debt personally, which puts it on the personal side of the LLC's liability wall. In year one most owners fund the business from savings and a business credit card they pay in full every month. What you can do now is build the record a lender will ask for later: the separate bank account, clean monthly books, on-time filings, and a year of profit you can show. Owners in a recent r/smallbusinessowner thread on cash flow timing (Reddit, October 2026) said the same thing from the other side: open the business card and ask the bank about a line of credit early, while you do not need it, because the day you need it is the day it is hardest to get. Talk to your CPA and your bank first.

I got a letter demanding a fee. Is it real?

Often it is not. State business registrations are public, and new LLCs get official-looking mail within weeks offering a "certificate of good standing," "labor law posters," or a "compliance filing" for $100 to $250. Read the fine print. If it is not from your state agency or the IRS, you can usually ignore it. The federal beneficial ownership (BOI) report that many of these letters mention no longer applies to companies formed in the United States: FinCEN exempted them in March 2025 (FinCEN).

Where a planner fits

What I do is make sure the entity choice, your salary, your retirement plan, and your household's investments work as one plan instead of four separate decisions. If you formed an LLC and want a second set of eyes before the March 15, 2027 election date, book a call and bring your year-to-date profit and loss. That is what our business owner planning covers. Our FAQ page explains how we work with owners and what it costs, and more guides are in our For Business Owners hub.

Related: LLC vs S Corp in Maryland and Virginia · How to find a good CPA for your small business · Solo 401(k) vs SEP IRA for S corp owners

Sources

Tax figures are 2026 amounts from the IRS, SSA, Maryland SDAT, and Virginia SCC as of October 2026 and may change. The example is hypothetical. This post is general education, not individual tax, legal, or insurance advice. Entity choice, reasonable compensation, payroll, and state filings are decisions to make with your CPA and attorney.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Securities and investment advisory services offered through LPL Enterprise (LPLE), a Registered Investment Advisor, Member FINRA/SIPC, and an affiliate of LPL Financial. LPLE and LPL Financial are not affiliated with Allset Wealth.

Danni Shen, CFA®
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