S-Corp - Salary/Dividend

[Daniel Vieyra]

I have set up an S-Corp and working on my first flip. I plan to keep any profits in the business for the first couple of years until I have some flips under my belt and/or making a good amount of money. So I will not be taking a dividend in the initial years. Since I will not take any of the profits out of the business (reinvest), are some owner/employee of an S-Corp taking a salary in the start-up years? Do I need to have a salary in the first years were profits maybe low? Or will the salary start once a dividend is paid out? Once the salaries are paid out via payroll, how are owner/employees getting paid? Once a year, quarterly, monthly or after a rehab project?

[Nicholas Aiola]

@Daniel Vieyra

As @Wayne Brooks mentioned, your profits will pass-through to your personal tax returns via Schedule K-1. Cash distributions from the S Corp are irrelevant in this case.

If you're profitable, you must pay yourself a reasonable salary from the S Corp. It doesn't matter how frequently you pay yourself a salary, just that the year-end total is "reasonable".

Reasonable does not mean arbitrary. Consult your CPA.