Owner salaries and how they affect lost profits

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Abstract: On paper, a company’s profits may bear little relationship to its actual financial performance, since C and S corporations often treat salaries differently. This can affect a company’s ability to recover lost profits damages, depending on state law. This article looks at the seemingly anomalous results that can occur if a company pays out most of its earnings as owner salaries. Citations: Anesthesiologists Associates of Ogden v. St. Benedict’s Hospital, 884 P.2d 1226, 1238, 1994 (Supreme Court of Utah). Bettius & Sanderson, P.C. v. National Union Fire Insurance Co., Nos. 87-3036, 87-3043, Feb. 17, 1988 (4th Cir.)