How to Compute Owner 2 Compensation

How to Compute Owner 2 Compensation

Owner’s comp #2 is the TOTAL of all payments made, salary and salary equivalent, not benefits, to Owner #2 OVER AND ABOVE the standard payment he/she would receive for their designated job title. So, if Owner #2 is a production manager and the going average rate in the market is $50,000 then those costs would be in the COGS section of the profit/loss. IF Owner #2 took a salary of $100,000 the focus form would show $50,000.

For Example:

To compare the compensation of a one owner company and a two owner company, we must first “Normalize” the compensation of Owner 2:

These numbers are based only on numbers from the P&L

1. Owner 1 P&L full Compensation – $100,000.00

2. Owner 2 P&L full Compensation – $100,000.00

3. What a one owner company would pay someone that is holding the same positions as Owner 2 – $50,000.00

Owner 2’s compensation for just being an owner – $50,000
(Line 2 MINUS line 3)

Owner 2 Compensation for the Company Focus Data Input Form – $50,000

in Company Focus Information