In general, a compensation structure of strictly stock is not permitted under state and federal law. Employees must be paid at least the minimum wage in cash. However, there is an exception to this rule if the employee qualifies for exemption under the federal Fair Labor Standards Act (“FLSA”). To qualify for the exemption, an individual must (1) be employed in a bona fide executive capacity, (2) own at least a 20% interest in the business and (3) be actively engaged in the management of the business. Obviously the owner of an S-Corp would qualify.
If you are paying yourself wages with the stock and you have no cash income, how is the company paying the payroll taxes: Employer's share of social security and Medicare, unemployment insurance, and employee withholding of social security and Medicare? I don't understand what you mean by "I then take expenses as non-reimbursed business expenses" - can you clarify?
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