How much should you pay yourself as an S-Corp owner?
Don’t guess. Get a data-backed reasonable compensation report.
Your S-corp salary shouldn’t come from a random percentage, what your friend pays herself, or whatever number happens to produce the biggest tax savings.
If you work in your S-corp, you’re required to pay yourself reasonable compensation.
The question is: What the hell is “reasonable” for you?
We’ll calculate a defensible reasonable salary based on what you actually do in your business and give you the documentation to back it up.
$295. No ongoing Countless engagement required.
What is reasonable compensation?
Reasonable compensation is essentially what someone else would need to be paid to do the work you perform for your S-corp.
Which is why there isn’t one magic percentage or salary that works for every business owner.
- Your actual work matters.
- Your responsibilities matter.
- Your experience matters.
- Your industry matters.
- Where you live matters.
- How much time you spend doing different things in the business matters.
“I pay myself 40% of my profit” is not a reasonable compensation analysis.
Why does my S-Corp salary matter?
One of the reasons S-corps can save business owners money is that not all business profit is necessarily subject to payroll taxes.
But you don’t get to avoid payroll taxes by simply paying yourself nothing.
If you perform services for your S-corp, you generally need to pay yourself reasonable compensation before taking non-wage distributions.
And the lower you make your salary, the more tempting the tax savings can look.
That doesn’t mean the lowest possible salary is the right one.
Your salary needs to be supportable based on the actual facts of your situation.
So how much should I pay myself?
That’s exactly what the report is designed to answer.
Instead of relying on a rule of thumb, we look at the work you actually perform in the business and use compensation data to determine an appropriate salary range.
You end up with an actual number and the documentation behind it.
Not: “My accountant said $50k sounded about right.”
What’s included in your Reasonable Compensation Report?
A DETAILED ANALYSIS OF WHAT YOU ACTUALLY DO
Running a business usually means wearing approximately 900 hats.
We look at the different roles you perform, the work involved and how much time you spend doing each.
COMPENSATION DATA
Your report uses wage data relevant to the work you perform rather than an arbitrary percentage of business income.
YOUR REASONABLE COMPENSATION FIGURE
The part you came here for:
How much should you actually pay yourself?
DOCUMENTATION TO SUPPORT IT
You’ll receive the completed report documenting how your reasonable compensation was determined.
Keep it with your tax records.
Who needs a Reasonable Compensation Report?
This is probably for you if:
- You own an S-corp and work in the business.
- You’re setting your salary for the first time.
- Your accountant or payroll provider told you to determine “reasonable compensation” and then left you to figure out what that means.
- You picked your current salary based on a percentage, rule of thumb or educated guess.
- Your business or your role in it has changed significantly since you last determined your salary.
- Or you’ve been thinking:
“I have absolutely no idea whether I’m paying myself correctly.”
We can fix that.
The 50/50 Rule? The 60/40 Rule?
They’re not reasonable compensation methodologies.
There are plenty of S-corp salary rules of thumb floating around the internet.
Pay yourself 50% of profit.
Or 60%.
Or $50,000 once you hit some magical revenue number.
The problem is that reasonable compensation is based on the work you perform, not an arbitrary percentage of your business’s profit.
Two business owners with identical profits can have very different roles — and very different reasonable salaries.
Your salary should be based on your situation. So we calculate your situation.
Already an S-Corp? Perfect.
You don’t need Countless to do your bookkeeping.
You don’t need to sign up for Tax Planning.
And you don’t need an ongoing accounting engagement.
If you already know an S-corp is the right entity for you and simply need to determine a defensible salary:
This is the service you need.
Not sure you should be an S-Corp in the first place?
Then don’t start here.
A reasonable compensation report tells you what an appropriate salary looks like if you’re operating as an S-corp.
It doesn’t tell you whether electing S-corp status actually makes financial sense.
That’s a different question — and we have a different service for it.
Our S-Corp Analysis + Setup looks at the bigger picture: taxes, reasonable compensation, retirement strategies, state implications, PTET, payroll and compliance costs, cash requirements and the actual work involved in operating an S-corp.
Your S-Corp salary shouldn’t be a guess
You formed an S-corp to save taxes.
Cool.
Now you actually have to pay yourself correctly.
Get a data-backed reasonable compensation figure based on what you actually do — and documentation showing how we got there.
REASONABLE COMPENSATION REPORT: $295
