USA Retired business owner salary?

[accounting00USA]

Hello, all!
What are your opinions on what a retired business owner should receive for salary? I have never seen this scenario, so trying to figure out if it is normal.

Our business owner is retired, does not handle any company affairs anymore, yet draws a salary of over $200,000. It is a small business and the salary itself puts a strain on payroll expenses and severely limits what the current employees are able to make.

In addition to the salary, dividends are paid... phone bills and other personal utilities are paid for.

Family owned business so extremely sensitive topic. Cannot bring up the concerns without a solid proposition. The salary has been getting increased at will.

 

[bklynboy]

I dont see how you can record as salary if no services are provided and think it should be treated as a distribution. Not 100% sure on this so maybe others can see if they encountered this situation.

 

[accounting00USA]

I dont see how you can record as salary if no services are provided and think it should be treated as a distribution. Not 100% sure on this so maybe others can see if they encountered this situation.

Agreed. I am in the process of working up a case to present to company leadership. However... again, family owned business so have to tread carefully.

In my opinion, there is no contribution that justifies any of the pay out. Buisness owners should be treated with respect and get a fair salary, however, I see some of my employees here struggling and I'm unable to offer any raise because the business owner is maxing out our budget on payroll expenses with their own salary.

 

[kirby]

Hi accounting00USA
You write that you "have to tread carefully."
So you are aware that this is a huge powder keg and you are lighting a match.
Why do so?
Do you believe the family is unaware of the situation?
I think this is highly risky for you and you should think twice about it.
Reason is that it sounds like the retired business owner is still the shot caller.
And I don't think the retired business owner is going to appreciate your interference.
What do you think?

 

[ladyrider]

Hi accounting00USA
You write that you "have to tread carefully."
So you are aware that this is a huge powder keg and you are lighting a match.
Why do so?
Do you believe the family is unaware of the situation?
I think this is highly risky for you and you should think twice about it.
Reason is that it sounds like the retired business owner is still the shot caller.
And I don't think the retired business owner is going to appreciate your interference.
What do you think?

I totally agree with you. Unless there is obvious fraud then zip it. You're the accountant that's it. Your job is to run the financials and keep the books. If the people reviewing the financials don't see it then that's on them. I have in the past run the financial reports and shown the percentage of each line item on the expenses vs income and highlighted the big dollars hoping the client might get a clue but I'd never go so far as to come flat out and say hey you're paying this guy too much. Plus he's the retired business owner meaning he built that company.
When I retire I will have a staff of maybe 4 subs working for me hopefully and I'll be billing out for my company then paying them and keeping the rest. God help anyone who tries to tell me I am not being fair... it's my company and I built it from the ground up. Then again the only one doing my accounting for my business will be me so...

 

[bklynboy]

As an accountant you need to record transactions correctly. Whether he is allowed to receive payments for no services or not is part of the owners decision. However, if he is in fact retired and not performing any service then its not salary. Its a distribution IMO. It could also be a retainer fee or other such cost but definitely not a salary to me.