Hello,

In the situation where owner of an S-Corp has a business where his salary is 100% commission-based, how does he satisfy the "reasonable compensation" requirement?

In practice, owner takes commission at irregular intervals, because commission, by nature, is a product of a sale and sales happen when they happen. However, sales can be sufficiently high in value, so it's not as if owner is running a charity. In order to avoid incurring debt just for the sake of paying himself a salary, owner simply would pay large commissions when then occur (which can be infrequent).

Is this a problem? If so, how should he handle this issue based on the nature of his business?

Thanks.