As a C-Corporation, per IRS Regulations, Owner-Operators (actively involved members performing services) of a C Corporation MUST receive a W-2 (with the appropriate withholdings timely sent to the different taxing authorities involved) and THE COMPENSATION MUST BE REASONABLE.
The IRS defines Reasonable Compensation as the value that would ordinarily be paid for like services by like enterprises under like circumstances. Reasonableness is determined based on all the facts and circumstances.
As a matter of fact, nowadays, Reasonable Compensation is a major focus of attention of the IRS in the Audit of Business tax Returns.
You may pay dividends or retained them as you choose but only after addressing the Reasonable Compensation issue.
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