By Jack Salewski, CPA, CGMA
When is the proper time to make a distribution of earnings and profits to an S Corporation’s shareholders?
“I’ll just take distributions, then pay myself reasonable compensation at the end of the year.” Quack, quack.
“Holding a meeting is a hassle. I’ll just write a check for my distribution when I do payroll.” Waddle, waddle.
Reasonable Compensation is payment for the value of work performed by an S Corp shareholder/owner. Distributions are whatever the Board of Directors deems appropriate (votes on). These are two different events.