Expert: Shirley McAllister, CPP, PHR - 7/25/2008

Question
I work for a small S-Corp. The company has three partners, but two of these partners are paid by another company which they own together. My question is regarding the third partner. When I originally set up the company in Quickbooks, I did not list him as an employee, as he was a company owner. I have been writing him a check every two weeks for his compensation. He would like to be paid by direct deposit rather than a hard check. I recently noticed in the Quickbooks manual that if the company is incorporated, company officers can be paid as employees, and that I should ask an accountant.

Can you give me any input on this? Would I be able to enter this company officer as an employee, since I am already paying him bi-weekly anyway? How would this work with payroll taxes?

Thank you!

Answer
I have seen this both ways. Sometimes the corporate officers are paid by draws from the company funds and sometimes they are paid as employees.

I pay my company owner's as employees and hold out all payroll taxes, however, this is at their request.

You need to talk to the officer and find out how he wants it handled as you do not want his pay to be different than the other two partner's even though they are paid by another company.

Shirley