S-Corps salary and distributions for shareholders

Forum|Forum|1 year ago
February 17, 2025
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My husband and I have an S-corp with our son. We are equal shareholders but we are passive owners (retired and minimally contributing in the business) so we do not take a salary. We are 50% and he is 50%.

We pay him a salary and he and we take draws each month. If we are equal shareholders, is his salary considered part of his shareholder draw? If, for example, we took $10k a month, would my husband and I take 10k and we pay him 5k in wages and 5k for a draw?

MinhT1

The salary the S-Corp pays your son is for the work he provides to the S-Corp.

Usually, the shareholders will draw profits in proportion of their shareholding (not counting any salary paid).

So if you and your spouse draw $10k (for your 50% shareholding), then your son should draw $10k (for his 50% shareholding), in addition to his salary.

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