Parent: "then you are required to pay yourself a market rate salary" Only if there are distributions so if you are losing money or breaking even (by the IRS de

Parent: "then you are required to pay yourself a market rate salary" Only if there are distributions so if you are losing money or breaking even (by the IRS definition of that) you won't be paying any taxes: IRS: "The amount of the compensation will never exceed the amount received by the shareholder either directly or indirectly. " Parent says: "pay yourself a market rate salary." IRS: "There are no specific guidelines for reasonable compensation in the Code or the Regulations." http://www.irs.gov/newsroom/article/0,,id=200293,00.html http://www.irs.gov/newsroom/article/0,,id=200293,00.html The point I am clearing up is the issue of "having to pay yourself a market rate salary" which only comes into play if you are making enough to pay anything.