S Corporation Shareholder Compensation: How Much Is Enough?.

My advice is to make sure that you are always paying some type of reasonable compensation.  A minimum of 50% of net profits before salary or a standard salary that is consistent year over year.

Just because an officer/shareholder is a signer on a bank account, it doesn’t mean they can pay whatever or to whomever they want.  In other words, don’t use the business as your personal checkbook.  Make everything coming out of your corporate bank account as a legitimate business transaction.

Although it is sometimes advised to pay a s corporation shareholder rent in lieu of payroll, it is actually more important for finance and budgetary reasons.  If your home office is your main office (exclusive business use), I would always like to know what my rent expense would be in my financials so that as business was going to grow, I already have a cost in the financials to compare it to.

As far as a 2% shareholder in a s corporation, remember that a lease contract needs to be drawn up and it needs to be at fair market value or comparable rate.  The rent expense on the corporate return should equal the income on Schedule E page 1…It does not have any tax savings for a single s-corp owner.