Figuring out honest compensation for shareholder-employees inside an S company framework is an important process. Instruments designed to help on this course of think about elements akin to {industry} benchmarks, expertise, and contributions to the enterprise. For example, a person with in depth expertise managing a building agency structured as an S company would probably command the next wage than somebody with restricted expertise in an analogous function.
Establishing acceptable wage ranges affords a number of key benefits. It ensures compliance with IRS rules, doubtlessly avoiding penalties related to misclassifying distributions as wage or vice versa. Traditionally, disagreements over cheap compensation have been a supply of rivalry between the IRS and S firms. Using sources that information wage willpower permits for extra correct payroll tax calculations and strengthens the protection in opposition to potential audits.
