Is there a difference between a shareholder and an shareholder/employee?

[ajschmidt]

All,

I've got a question regarding reasonable salaries for a shareholder of an S-corp. I'm a 10% shareholder in an S-corp and I receive dividends. I, however, do not receive a wage as I am not an 'employee'... I am just an investor/shareholder. Is this correct? i.e. *should* I be receiving a wage? There are other shareholders of this S-corp that actually do participate as employees in the company and they do receive wages. Do I need to be treated differently... should I be treated differently? Just want to make sure we are handling this correctly.

Thanks!

What is the name of your state (only U.S. law)? Wisconsin

[davew128]

I would be inclined to say no, no wages because you are not providing services to the corporation.

[LdiJ]

Originally Posted by ajschmidt

All,

I've got a question regarding reasonable salaries for a shareholder of an S-corp. I'm a 10% shareholder in an S-corp and I receive dividends. I, however, do not receive a wage as I am not an 'employee'... I am just an investor/shareholder. Is this correct? i.e. *should* I be receiving a wage? There are other shareholders of this S-corp that actually do participate as employees in the company and they do receive wages. Do I need to be treated differently... should I be treated differently? Just want to make sure we are handling this correctly.

Thanks!

What is the name of your state (only U.S. law)? Wisconsin

No, you should not receive a W2 because you are not working in the corporation. The working shareholders receive a wage PLUS a pro-rata share in the corporate profits (distributed or not). You receive the pro-rata share of the corporate profits only. (distributed or not)