The Rules of Paying Yourself a Bonus, Part 3

What to do if you're an owner of an S corporation

Owners of an S Corporation can take money out of the corporation anytime they wish, without tax impact, by receiving a distribution of profit. If the business is organized as a C Corporation, the owners may also pay themselves dividends; however, these dividend dollars are double taxed--both to the corporation, since they are paid out of after tax dollars, and again to the owners personally as investment income. Additionally, if you work in your business, you can receive dollars from your corporation by paying yourself fair and reasonable wages, taxable to you, for work you performed. And if you have loaned your corporation money, you can receive repayments of any loan you may have made to the corporation, plus interest.

Source: "Taking Profits Legally--and With Minimal Tax Impact"