How to Hire Yourself as an Employee of Your S Corporation in California

✅You need to have an S corporation (LLC or corporation taxed as an S corp) set up before hiring yourself as an employee.

💰Paying yourself a reasonable salary is required by the IRS to properly manage taxes and payments.

📝Decide on a payroll provider to handle payroll filings, tax payments, and other related tasks.

🎯Setting a regular payroll schedule helps ensure you pay yourself consistently and manage cash flow effectively.

⚖️Determining a reasonable salary requires considering the job requirements, market rates, and profitability of the business.

What is a reasonable salary for an S corporation owner in California?

—The reasonable salary for an S corporation owner in California varies based on factors like job requirements, market rates, and business profitability. It's important to consult with a tax professional to determine the appropriate amount.

Do I need to hire a payroll provider for my S corporation?

—While it's not mandatory to hire a payroll provider, it is highly recommended to ensure accurate and compliant payroll management. A payroll provider can handle filings, tax payments, and help you stay up-to-date with payroll regulations.

Can I pay myself a lower salary to save on taxes?

—Paying yourself a lower salary than what is considered reasonable by the IRS can raise red flags. It's important to strike a balance between salary and profit distribution to comply with tax regulations and avoid potential audit risks.

What are the advantages of setting a regular payroll schedule?

—Setting a regular payroll schedule helps you stay on top of paying yourself consistently, manage your cash flow effectively, and simplify the process of filing taxes and complying with payroll requirements.

What if my business doesn't make enough profit to pay myself a reasonable salary?

—If your business is not generating enough profit to pay yourself a reasonable salary, you can adjust the salary accordingly. It's important to maintain documentation and consult with a tax professional to ensure compliance with tax regulations.

00:00Introduction to the topic of hiring oneself as an employee of an S corporation in California.

02:00Importance of setting up an S corporation and obtaining an Employer Identification Number (EIN) for proper taxation and compliance.

05:30Choosing a payroll provider to handle payroll filings and tax payments, with a highlight on Gusto as a recommended option.

09:00Understanding the concept of a reasonable salary and how it should be determined based on job requirements and business profitability.

11:30Importance of setting and following a regular payroll schedule to ensure consistent payments and effective cash flow management.

13:45Considerations and factors to take into account when determining a reasonable salary for an S corporation owner in California.

15:20Addressing frequently asked questions related to reasonable salary, payroll providers, tax implications, and business profitability.

17:45Conclusion and final thoughts on effectively hiring oneself as an employee of an S corporation in California.