What are the requirements for paying a salary to employee owners of a c-corp in the start up phase? I would assume the standard is that the salary must be reasonable, but what if expenses for running the business burn up cash? I’m more concerned with the case of debt servicing, rent, and other expenses that are paid to 3rd party vendors rather than the case of cash being deployed into employee benefit programs.
there is no “requirement” that a salary be paid. ever.
If you choose S-corp taxation to avoid SET on distributions from income, then you would need to be able to show that there is a reasonable salary and that FICA has been properly paid.
I didn’t draw a salary from my LLC/C-corp for several years while building business.
Thanks, Mark.