Regulations & Compliance

What percentage should you pay yourself from your business

Is there a standard for how much you can pay yourself as an S corp? Is there a threshold that the IRS looks for?

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Answer

  1. 2 Answers

    The IRS looks for a “reasonable salary”. The IRS does not define this. Generally, you do not have to pay yourself your first year of business. Also, if your S-Corp shows a loss, it is fine if you do not take a salary, as long as you do not also take distributions. Source: https://rcreports.com/resources/reasonable-compensation-blog/what-if-an-s-corp-owner-can-t-afford-to-pay-reasonable-compensation/

    For my clients, I tell them to think about how much you would get paid if you were to the same job for someone else or what they would hire someone at. Additionally, I also use this website: https://www.bls.gov/oes/current/oes_nat.htm to obtain current median salaries based on actual government data.

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