Blog: Insights From the Fastlane

Michael DiSabatino of Sharp CFO™ shares expert insights to help you unlock your business's full potential by delivering proven strategies for maximizing tax savings, streamlining operations, and driving sustainable growth.

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S-Corp Compensation Rules

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

Wednesday, 12 November 2025

Mike DiSabatino

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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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Reasonable Salary for S-Corp Owners S-Corp Compensation Rules S-Corp Wage vs Distributions IRS S-Corp Salary Compliance Effort-Based Salary Calculation

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