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 Blog: Insights From the Fastlane

Reasonable Salary for S-corp Owners: What It Is, Why It’s Required, and How We Defend It (Effort-Based)

The Rule, In Plain English

An S-corporation must pay shareholder-employees a reasonable salary for the services they perform before distributing remaining profits. This isn’t folklore; it comes from how the Internal Revenue Code treats compensation and payroll tax:

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