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Is a New York state privately held C corporation required to…

Is a New York state...
Is a New York state privately held C corporation required to pay a minimum living wage, to an employee of that corporation who owns 100% of that corporation, and if yes, what specific law requires this, or if not, where is the language that specifically exempts the owner ? I need a specific answer, preferrably a link to a statute, and am willing to pay for a specific answer, but not for a vague answer that does not cite a statute.
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Answered in 2 hours by:
3/19/2018
Asad Rahman
Asad Rahman, Attorney
Category: Business Law
Satisfied Customers: 2,527
Experience: Practicing Attorney with 10 years experience
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Just for clarity is he the only employee of the corporation?

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Customer reply replied 4 months ago
No he is not the only employee. His annual payroll to others is around 250K. He only pays himself 1 dollar per year. He does pay health insurance to himself (which costs 12K per year) and life insurance which costs 1.5K per year.
Customer reply replied 4 months ago
New York state gave him an opportunity (because he was sole owner of the corporation) to sign a waiver, which exempted him from having to buy disability insurance for himself, so he is surprised when he hears that he may be required to pay himself a minimum salary of 10K per year. He does carry a workers comp insurance policy, which in turn does cover him. He has no statuatory employees. He has never had more than 2 employees, and they have all been members of his family.

So I did some research and do not see any absolute New York requirement but the IRS feels that there should be fair compensation for the employee for his services rendered. It sounds to me like he trying to avoid corporate taxes and probably gets dividends from the company.

Asad Rahman
Asad Rahman, Attorney
Category: Business Law
Satisfied Customers: 2,527
Experience: Practicing Attorney with 10 years experience
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Customer reply replied 4 months ago
He gets no dividends from the company, and is not attempting to reduce his tax burden. One of his employees is his wife. If he were to reduce her salary by 10k, he could afford to pay himself 10k. A new york state bureau of labor auditor told him he needs to do this. He has done extensive research and can not find any statute that requires this, nor does it look like doing this would affect his taxes in any way. He is not disputing the auditors findings and is just curious about why they would say such a thing. I am going to go ahead and pay you, and consider the matter closed, however if you can provide a more specific answer, it would be greatly appreciated. As of right now I am basically in the same boat I was in before I posted this question.

Thank you for that. I am continuing my research.

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I still do not seem to find anything other than that NY tax laws tend to try and mirror federal tax laws and the IRS does require some reasonable compensation for a shareholder employee.

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Customer reply replied 4 months ago
It makes sense that the IRS would require reasoanble compensation to shareholder employees in general, otherwise, the owner of for example a car wash, could avoid minimum wage laws, by making all of his employees minor shareholders. The particular case I am asking about is different, because the employee in question owns all of the shares and is not avoiding any taxes. New York state specifically exempts such an employee from many New York employment law requirements. In any case, thanks for trying, there is no need to search any further.
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