can the ceo of the company pay himself more than he’s partner ?

UPDATED: Sep 30, 2022

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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


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 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.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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