We have a family owned business in which the business pays 50% of the medical for the shareholders only. Not the employees. The business is divided up 40/30/30. Does the part of the insurance premium that's paid for by the business come out as a shareholder withdrawal? We are located in IL and are a C corp

Stockholders can only withdraw money from a C corp in the form of salary, stock dividends, or loans.you, as a S/H , usually withdraw money as salary from your corp. If you are an employee of a C corp who is being compensated for work provided to that corp, you can withdraw money from the corporation in terms of salary.
Insurers either agree or are required by law to cover all qualified employees in a group, along with their dependents. Some states require employers that employ more than a set number of people to provide group coverage for their employees. Others make employee health coverage strictly voluntary. C Corp can deduct health insurance premiums for an individual health plan that the employee has procured on his or her own. In either case, employers must typically pay for at least half of the coverage, while the employee contributes the remainder. The employee does not pay taxes on money the employer spends on his behalf, but the employer can take a tax deduction on any premiums it pays to provide health coverage for its employees, to include owner-employees. If the employer sponsors a plan and pays the premiums, the employer can deduct the cost of premiums as an ordinary business expense.So, as long as a C corp pays the health insurance premiums for a majority stockholder , the premiums are deductible by the corp assuming you've got no reasonable compensation issue. (Works 5 hours a year, gets $2k in wages plus $20k in health insurance premiums, you might have an issue.) Generally speaking, a C-corp enjoys a full deduction for the cost of employees’ (including owner employees’) health insurance premiums and even long-term care premiums without regard to age-based limitations. Thus the corporation can deduct any medical expenses or health insurance it pays for the officer/employee as a health insurance deduction item."If the C Corp reimburses you, it would not constitute income to you as long as the option must be offered to all employees. For C-corp health insurance premiums paid for employees and families that qualify as nondiscriminatory are deductible for C-corp and excludable from gross income for shareholders. It also doesn't matter if premiums are paid directly from the business account or reimbursed to the employee. The premiums are not included in the stockholder's w-2 as payroll and /or fringe benefits. If properly documented, it does not constitute taxable income to you as it is a non taxable fringe benefit. However, this option must be offered to all employees. The whole point of a small C-corp is to get health insurance / medical reimbursement.