Compensation for Family Members & Employees in the Closely Held Business

Closely held and family businesses face unique issues in compensating employees and family members. They must compete with public companies for management talent, but don’t usually offer stock options and other equity opportunities. They may also have greater difficulty in accessing information about competitor pay practices.

When it comes to compensating the owner/CEO, attention must be given to the tax efficiency of compensation methods and to the dangers of “unreasonable compensation” in the eyes of the IRS. Compensation of other family members in the business is complicated by personal relationships and the struggle to come up with a “fair” and competitive pay package.

This presentation will deal with these issues through the exploration of the following topics:

•  Examining the effectiveness of your pay practices
• How to develop a management pay strategy that will attract, retain, and motivate
• Owner & family pay strategy
• Avoiding IRS “unreasonable compensation”

Ms. Ding has advised closely held businesses about employee and family pay issues ranging in size from a few million to hundreds of millions in annual revenue. She also provides expert witness testimony in IRS unreasonable compensation litigation.