How Often Can You Pay Yourself from an S Corporation?

Operating your business as an S Corporation (S corp) can offer numerous advantages, including tax benefits and liability protection. As a shareholder-employee of an S corp, you may be wondering about the frequency at which you can pay yourself.

This article aims to provide a comprehensive understanding of how often you can pay yourself from an S corp, taking into account relevant legal and practical considerations.

At the end of the day, you decide how often to pay yourself based on your work hours. It could be weekly, monthly, once or twice a month, or less frequently. If you need add’l funds, you may take a shareholder distribution as you see fit.

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Understanding S Corporations

An S corporation is a business entity that combines the limited liability protection of a corporation with the pass-through taxation of a partnership or sole proprietorship. It allows the business owners (shareholders) to report their share of profits and losses on their personal tax returns, avoiding double taxation.

Reasonable Compensation

One crucial concept to grasp when determining how often you can pay yourself from an S corp is “reasonable compensation.” The Internal Revenue Service (IRS) requires S corp shareholders who are also employees to receive “reasonable compensation” for the services they provide to the corporation. This compensation should reflect the fair market value of the services rendered.

To determine reasonable compensation, several factors must be considered, including the shareholder’s role in the company, the industry standards, the local market, the level of experience, and the company’s financial performance. While there are no specific guidelines for determining reasonable compensation, it is essential to consult with a tax professional or use reliable compensation surveys to establish a reasonable salary.

Pay Frequency Options

Once reasonable compensation is determined, S corp shareholders can pay themselves in various ways. The frequency at which you can pay yourself largely depends on your specific financial needs, the availability of company funds, and your company’s payroll capabilities. The following are common pay frequency options:

  1. Monthly Salary: Many S corp shareholders opt to pay themselves a fixed monthly salary. This provides a consistent income stream and simplifies personal budgeting. Monthly salaries are suitable for shareholders who prefer a regular paycheck and have steady financial obligations.
  2. Bi-Weekly or Semi-Monthly Pay: Bi-weekly or semi-monthly pay schedules are also popular options. These payment frequencies align with regular payroll cycles and can be more convenient for employees who have recurring expenses, such as rent or mortgage payments.
  3. Quarterly or Annual Distribution: S corp shareholders can choose to pay themselves on a less frequent basis, such as quarterly or annually. This approach may be beneficial if the business experiences fluctuations in cash flow or if the shareholder prefers to reinvest profits back into the company for growth.
  4. Combination Approach: Some S corp shareholders adopt a combination approach, receiving a regular salary while also taking periodic distributions based on available profits. This approach allows for a steady income stream while still enabling shareholders to benefit from the pass-through taxation advantages of an S corp.

When determining how often to pay yourself from an S corp, it is crucial to comply with legal and regulatory requirements. As an S corp, you must adhere to employment tax obligations, including withholding and remitting payroll taxes for both yourself and any other employees. Failing to comply with these obligations can result in penalties and legal consequences.

How Often Can You Pay Yourself from an S Corporation?

Since determining reasonable compensation and structuring pay frequency can involve complex tax and legal considerations, it is advisable to consult with qualified professionals. Accountants, tax advisors, and employment law attorneys can provide valuable guidance specific to your business and ensure compliance with relevant laws and regulations.


As an S corp shareholder, the frequency at which you can pay yourself is flexible and depends on factors such as reasonable compensation, personal financial needs, and company cash flow. Establishing a reasonable salary based on industry standards and consulting with professionals can help you determine the most appropriate pay frequency for your unique circumstances. By ensuring compliance with legal and regulatory requirements,

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