Payroll for an S Corp with two employees

[xsys2001i]

This is a general question, as I do plan to meet with and discuss with a CPA, but would like to know what others have to say about my questions.

My wife and I have a small consulting business that we work in the evenings after our real jobs. She handles the day to day and bookkeeping, I go and turn the screws for the clients. We're structured as an S Corp, and have been operationg for a little over a year now.

My questions are:

1) setting up a payroll -- since business is slow and income is not reliable at the moment, if we setup a pay period of say monthly, do we have to keep making a monthly payroll each even if we have no business during that period? or can we pay ourselvse only for the months we have income?

and

2) Say we have an income of $2000 during August but have have an income of $10,000 in September. Is it OK to change the rate of pay during muchs of higher income? or does salary have to be a steady consistent amount? asking this because would like to payout the bulk of income as not to keep money tied up in the buisness at the moment.


Thanks

[ArcSine]

You can vary both the frequency and the amounts of the paychecks so as to better match your company's fluctuating revenue stream. There's no rule that you can't skip a paycheck if the cigar box is a little light one month, nor that you can't give yourself an extra bonus paycheck when and as there's some surplus rolling in the door.

[Business Attorney]

ArcSine is right. As long as you are paying a reasonable salary, there is nothing wrong with fluctuating the payments based on income or cash flow. Think of salesmen working mostly on commission. No sales, no paycheck

[jamesray50]

You will have to remember to still any monthly or quarterly returns even if you had no payroll during that period. Just fill in all zeros.