![]() These can provide some data on reasonable salaries, but be sure you customize those estimates with company- and shareholder-specific factors, including: ![]() Look for compensation studies from trade associations or executive headhunters. When establishing an S Corp owner’s salary, documentation helps. The same concept holds if a stockholder is a sales manager, CFO, operations manager, etc. For example, if the owner is a CEO, his wages must be based on what a CEO for that size company would earn. Reasonable is a subjective term, but the IRS does give some guidelines to help establish reasonable compensation.Įssentially, the wages must be in line with the position the owner holds. The owner must have taken reasonable compensation for the value of their services Typically, the answer is a distribution, but there are two requirements the shareholder must meet for this to make sense: For companies organized as S corporations, the question often comes down to whether they should boost their take-home pay with a year-end bonus or distribution. It’s almost the end of the year, so business owners are looking at their financial statements for ways to increase their compensation without hurting the business or getting into tax trouble.
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