We work diligently with our clients that have S entities to ensure that they receive reasonable compensation. You do recall that pass-through companies like S entities must pay their principals ‘reasonable compensation’ (a salary commensurate with their experience, capabilities, and time worked). In so doing, the rest of the profits of the firm can ‘pass-through’ to the principals, without being subject to employment (social security and Medicare) taxes, a savings of some 15+% to augment the pass-through revenue.
Tag Archives: reasonable compensatio
#1 Purchase
I’ve written about reasonable compensation (as recently as two days ago, I might add). Which is a complicated way of saying that when you are the owner of a company, you must receive a salary that reflects your efforts and your worth.