QUESTION
Who decides on the amount for officer/employee salaries/benefits in a small S-Corp?
Asked on Jun 12th, 2014 on Business Law - California
More details to this question:
Small business S-corp with two shareholders, each holding 50% of stock. One share holder holds title of CEO/Secretary and the other is CFO. If one or both officers/stock holders are also employees of the corporation, what is the protocol/procedure for setting their salaries/compensation? There is a difference in opinion between the two "partners" over what each should be paid and no idea who has the proper authority to make the call. Bylaws and Articles of Incorporation do not address this issue. Thanks!
1 ANSWER
2 Awards
Hi,
If you are 50-50 shareholders you are pretty much at a stalemate. Typically you would want to have a shareholder's agreement that would set forth how these decisions are to be made. The fact that one shareholder is a CEO/Secretary and the other is a CFO is really pretty irrelevant, assuming that you both are members of the board of directors.
Given the fact that issues like these will probably continue to come up I would suggest that you have a shareholder's agreement prepared to set forth the process to make these decisions where there is disagreement. Mechanisms can be put in the agreement to deal with situations where you disagree with your partner.
Thanks,Jon
Answered on Jun 12th, 2014 at 3:58 PM