How to Structure Owner Compensation for Tax Efficiency

How you pay yourself as a business owner isn’t just a paycheck decision - it’s a tax strategy. For S corporation owners, the IRS says you’re both an employee and a shareholder, which means balancing W-2 wages with profit distributions. Partnerships follow a different playbook, using draws and guaranteed payments instead of salaries. The right mix can lower payroll taxes, maximize retirement contributions, and keep you compliant. Here’s how to structure owner compensation for tax efficiency - and avoid costly mistakes.