can the ceo of the company pay himself more than he’s partner ?
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can the ceo of the company pay himself more than he’s partner ?
we both own 50 of the company. but he wants to pay himself on salary 50
more than me , is that legal ?
Asked on July 4, 2017 under Business Law, California
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 6 years ago | Contributor
It is "legal" in the sense that there is no inherent requirement in the law that partners be paid the same--whatever they agree to is legal. Pay does not have to be proportionate to ownership. If he has more responsibilities or does more work than you, it's not unreasonable for him to be paid more. For example, I used to have a small publishing LLC with two other partners: I owned 55%, partner 2 owned 25%, partner 3 owned 20%. But in addition to owning more, I was also the full-time president and only full time employee; partner 2 did not work (he only invested money), while partner 3 worked only around 1/4 to 1/3 time. Therefore, while we shared in profits proportionate to ownership, in terms of salary, partner 2 received none, while partner three, even though he owned 40% as much as I did, only received 1/4 the salary. We set the salaries (not the profit distribution) equivalent to our relative daily contributions and responsibilities.
So legally, your partner can be paid more than you; and if he is the CEO, it may be appropriate for him to be paid more. BUT because you are each 50% owners, you must agree: neither can make this decision without the concurrence of the other. So you can block him, since you own as much as him, from being paid more; the two of you must agree on the salaries.
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