Dear client,

As a S-Corp owner, do you need to pay yourself a wage?

How much should you pay yourself? Does this need updating? These are all common questions, which we’ll address today.

Do you need to pay yourself a wage?

The answer is yes. In a nutshell, businesses organized as S-Corporation must pay their shareholder-employee (you) a reasonable wage before non-wage distributions may be made.

This wage is called Reasonable Compensation.

How much to pay yourself?
If your reasonable compensation is set too low, you may attract the eyes of the IRS. Setting a proper amount is key to running a business legally and uninterrupted.

The IRS states they have the ability to determine what is and isn’t deemed reasonable. Furthermore, the amount of reasonable compensation will never exceed the amount received by the shareholder directly or indirectly.

Does it need updating?

Your wage should be reasonable for the amount and type of work you do. If those variables update, it makes sense to take a look at your wage as well.

At W. E. Stevens, PC, we have a structured way of determining reasonable compensation for our clients to protect them from IRS challenges. The key is not setting it too low, which we will be happy to determine.

If you’d like to hear more or confirm your compensation is up to date, please use the button below.

Sincerely,

W. E. Stevens, P.C.

Serving you through a thoughtful client experience, wise long-term perspective, and very experienced staff