Some thoughts on owner comp based on a few owners I helped this year.

Owner comp should be set at market value. The tax benefit of setting it low is more than offset by many other drawbacks.

I'll hit three

1. You won't understand your business.

Your margins will be overstated.

Upon adjustment by outside party, you'll find the business value is FAR LESS than you thought.

You won't know if your business is sick or not.

You won't correctly ascertain your returns (assets, capital)

2. You won't scale correctly.

Low salaries mess with cost economics.

Many quote wrong based on the wrong numbers.

As they grow, they don't have the cash to fund that growth once current capacity is maxed.

They end up stagnant for years with little to no growth, and NO CASH.

3. Risk of Bankruptcy

Yeah... IRS loves looking for this.

Low owner salary is a great way to increase your chance of an audit.

I wrote a few thoughts on why a market salary makes sense for owners.

https://www.joshuaschultz.com/thoughts/paying-yourself-as-an-owner