[IMGCAP(1)]Small businesses, generally those organized as S corporations or partnerships, can run afoul of IRS guidelines governing “reasonable compensation” for individuals who are both owners/shareholders and employees of these companies.

Traditionally, compensation issues have arisen when the IRS has challenged “excessive compensation” with owners of regular “C” corporations. In those cases, the shareholders are often attempting to avoid the double taxation of having income of the corporation taxed at both the corporate level and again as a dividend.

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