I have an S-Corp with two other principles. We are a Software VAR and are starting to develop some of our own software for sale to businesses. We bootstrapped the business and have no additional employees.
We originally set base salary at $100k per year. In looking back, we believe we set salaries too high. We are carrying the back salaries as a liability. This is our second year in business and we expect to make about $50k this year.
We know a lot more about running a business now, so I am exploring lowering our base salaries to $75K per year, which we believe is more reflective of the market and would be acceptable as a base salary in the eyes of the government. We also aren't sure if we need to carry the unpaid back salary at 100k if we lower our base.
Any thoughts on lowering base salary going forward and reducing our back pay liability would be appreciated. I plan to talk with an accountant who is very familiar with S-Corps, but like to have background before I do that.
Thanks,
Brian
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