Typically, when you own a business taxed as an S-Corp, you can be paid in two ways: through a W-2 salary as an employee and through distributions of profit as a shareholder.
First, the IRS says that you must pay yourself a “reasonable salary”, which is subject to both income taxes and self-employment taxes.
To pay yourself a salary, you will need to use a payroll provider, such as Found’s preferred payroll partner Gusto.
Here’s how:
1. Payroll providers typically withdraw payroll funds directly from your linked business bank account via ACH transfer. To set this up, go into your payroll provider’s platform and link your Found account by entering its account number and routing number.
Tip: If you’re using Gusto, navigate to Settings > Plan & billing > Bank accounts, and add your Found account details there.
2. If you’d like, you can create a Pocket for “Owner’s Pay” and set a deposit allocation to automatically set aside money for your salary every time you’re paid. This is helpful to understand how much of your Found balance is earmarked for your salary and how much can be used for other business needs.
Tip: If you’re saving money in a Payroll or Owner’s Pay Pocket to cover payroll, use that Pocket’s unique account number, so that the funds will be pulled from there instead of from your Primary Pocket.
3. In the Activity section, make sure to add the “Employee Wages” expense category to any payments made to yourself as a salary.
Make sure to check out our guide on how to get the most out of Found as an S-Corp.
