There’s no easy way to determine reasonable compensation. Here are some steps you can take to make it more likely that the compensation you earn will be considered “reasonable.”
How to Determine Reasonable Compensation for Business Owners
Tag: reasonable compensation
Cut your Self-Employment Tax by Operating as an S-Corp
If your business is organized as a sole proprietorship or as a wholly-owned limited liability company (LLC), you’re subject to both income tax and self-employment tax. There may be a way to cut your tax bill by conducting business as an S corporation. Fundamentals of self-employment tax The self-employment tax is imposed on 92.35% of
Compensation vs. Dividends: Determining Reasonable Compensation
There’s a tax advantage to taking money out of a C corporation as compensation rather than as dividends because a corporation can deduct the salaries and bonuses that it pays executives.
Using an S Corporation may Reduce your Taxes
Depending on your entity type, you’re subject to both income tax and self-employment tax. There may be a way to cut your tax bill by using an S corporation.
Is S Corp Status Right for Me?
Operating a business as an S corporation may provide many advantages, including limited liability for owners and no double taxation. But not all businesses are eligible.