Reasonable Compensation and the Single Shareholder S Corp
- November 1, 2016
- Posted by: RCR Admin Team
- Category: Archived
By Jack Salewski, CPA, CGMA & Paul S. Hamann
“If there is only one shareholder and no other employees, should all distributions be taken out as Reasonable Compensation?”
This is a common question we receive at RCReports and like with most of the questions we receive, the answer is: “Maybe.”
If the business is so unique or the services of the shareholder are so unique, that no one could be hired to replace the owner and there are no other assets in the corporation, then everything taken out of the business should be treated as wages (Reasonable Compensation) and nothing should be considered a distribution.