How do I pay myself as an owner of a C corp?

A C corporation is a business structure that’s owned by shareholders. While it's a common alternative to the S corp, small businesses usually don’t pick C corps as their first choice. This is because they’re generally more complicated, are subject to double taxation, and typically have high fees. However, for many companies, the C corp can be an attractive option because it allows people to take stock in exchange for an ownership stake.

Paying myself as an owner of an C corp

If you provide more than small services for a C corp, you're considered an employee. Therefore, you should receive reasonable compensation for your work, which is subject to payroll taxes.

What is reasonable, you ask? The IRS has a bunch of rules it needs to follow, so chat with a tax advisor to ensure your compensation is in line with all federal requirements. Also remember your reasonable compensation must be paid before making non-wage distributions.

 

Curious about other business structures? Here’s a quick breakdown:

Business structure

How to pay yourself

Tax return

Sole proprietorship

Owner’s draw

Schedule C (Form 1040)

LLC with one member

Owner’s draw

Schedule C (Form 1040)

LLC with multiple members

Distributive share

Schedule K-1 (Form 1065)

Partnership

Distributive share

Schedule K-1 (Form 1065)

S corporation

Distributive share

Schedule K-1 (Form 1065)

C corporation

Dividends

Dividends income on Form 1040

Corporate Officer

Employee wages (if you perform more than minor services for the business)

Form W-2

 

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