Change an employee's 2% shareholder status - S-corps

If your business is listed as a sole proprietorship or an LLC in Gusto, you can change your employee's S-Corp shareholder status in Gusto. If your company is not set up as an S-Corp or LLC, change your entity type first

It's important to accurately enter an employee-owner's 2% shareholder status because this affects how their health insurance premiums are taxed and affects eligibility for other benefits. 

If you have Gusto managed benefits, let us know if your shareholders are 2% or less, or greater than 2% shareholders, so we can make sure your contribution scheme is compliant.

2% shareholders and owner's draws

We currently don't have the ability to set up an owner to receive both a taxable salary and a non-taxed owner's draw. If you have an owner who is a W-2 employee but also requires owners draws, you'll need to handle the owner's draws (and any related tax forms for this person) outside of Gusto.

Depending on when you're updating the shareholder's status, and if they've had previous benefit deductions, the next steps may differ. Choose the most applicable scenario from the dropdowns below.