@Anonymous_ wrote:
@Opus 17 wrote:
If there are additional profits after paying yourself a reasonable salary, you can take that as a distribution.
An S corporation shareholder can take a distribution at any time, regardless of whether or not a salary is paid.
A sole shareholder, such as @Haroon, is taxed on the net profit of the corporation (aka ordinary business income on Line 1 of Schedule K-1 (1120-S). Any salary taken by the shareholder serves to reduce that net profit.
If the shareholder (owner) materially participates (and is not a passive investor) they must take a salary. I did not mean to indicate that a distribution could only be taken after paying a salary, although from a practical point of view, the amount of distribution that can be taken isn't really knowable until you take the salary into account when determining profit. Whether the distribution is physically paid before, after or at the same time as the salary is unimportant.
