The IRS legally requires employees to be paid a reasonable salary. As an employee of your own company, Heard will help you to determine said salary.
Heard will help you to determine a salary by:
- Determine your net income before any salary amounts are paid.
- Determine a salary that makes up 45-55% of net income.
*This is based on the IRS' Valuation Analysis Field guide by industry. The average percentage of salary to net income in the healthcare industry is 59%. This is fairly high for a small business, and we are comfortable applying the set range above (45-55%).
Depending on when you become an S corporation during the year, you may need to run a catch-up payroll. Heard can help you initiate an off-cycle payroll in order to catch you up for the quarter you are setting up.