S-Corp shareholder salary

I am adding some questions I have come across while building our new community platform. Figured these would be great conversation starters!

What is a reasonable salary for an S-Corp shareholder? Is there an ideal ratio for salary vs expected distribution?

Best Answers

  • roxanneroxanne Posts: 3
    Accepted Answer

    There is no ratio. Your shareholder needs to take a reasonable salary for the job that he/she does. I would check the Bureau of Labor statistics. They publish average salaries by type of job for national, regional and metropolitan areas and document how you came up with that amount for the salary.

  • KellyKelly Posts: 14
    Accepted Answer

    I completely agree with Roxanne. Another good resource is RC (Reasonable Compensation) Reports.

Answers

  • I agree there is no ratio, but it is typically a red flag to me if the officer compensation of a one-employee business is < draw. In most cases, it should be at least 60% wages unless they have DOL or other documentation showing they are paying a reasonable wage.

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