WFU Law School
Law & Valuation
5.5.2 Method Chosen

5.5.3 Owner's Compensation

Unreasonable owner's compensation

Owner's compensation should be adjusted to a reasonable amount since excessive compensation will lower your earnings and understated compensation will overstate your earnings. Compensation information for accounting, medical, legal, and dental practices is available (see table to the right).

Perquisites, officer perks such as car expenses, insurance payments, medical expense payments, travel expenses, entertainment expenses or payment of personal expenses out of the company may be part of office compensation, but they are also factors that will reduce the earnings and thus lower the value of the corporation and should be removed by "normalizing" earnings.

Reasonable Compensation Resources for Accounting Firms:

Management of an Accounting Practice Handbook, (Includes operating statistics gathered at the annual AICPA practice management and small firm conferences), annual. American Institute of Certified Public Accountants and Practitioners Publishing Company, P.O. Box 966, Fort Worth, TX 76101, (800) 323-8724.

Management of an Accounting Practice Survey, National Results for 1993, annual. Texas Society of Certified Public Accountants, 1421 Mockingbird Lane, Suite 100, Dallas, TX 75247-4957, (214) 689-6000. Surveys are also available summarizing the results of participating states.

Reasonable Compensation Resources for Dental Practices:

The Survey of Dental Practice, annual. American Dental Association, Bureau of Economic and Behavioral Research, 211 E. Chicago Avenue, Chicago, IL 60611-2678, (918) 440-2500.

Dental Economics, magazine salary survey published annually. Pennwell Publishing Company, Dental Economics Division, Box 3408, Tulsa, OK, 74101, (918) 835-3161.

Reasonable Compensation Resources for Law Firms:

Small Law Firm Economic Survey, annual. Altman Weil Pensa, 2 Campus Blvd., Newtown Square, NJ 19703, (215) 359-9900.

The Survey of Law Firm Economics, annual. Altman Weil Pensa, 2 Campus Blvd., Newtown Square, NJ 19703, (215) 359-9900.

North Carolina Bar Association Economic Survey, annual. North Carolina Bar Association, NC Bar Center, 8000 Weston Parkway, Cary, NC 27513, (800) 662-7407.

Reasonable Compensation Resources for Medical Practices:

Physician Compensation Survey, annual. Center for Research in Ambulatory Health Care Administration, Medical Group Management Association, 104 Inverness Terrace East, Englewood, CO 80112-5306, (303) 799-1111.

Physician Marketplace Statistics, annual. American Medical Association, Order Department, P.O. Box 109050, Chicago, IL 60610-9050, (800) 621-8335.

Medical Economics, magazine salary survey published annually. Medical Economics Publishing, Five Paragon Drive, Montvale, NJ 0764-1742, (201) 358-7300.

5.5.2 Method Chosen

©2003 Professor Alan R. Palmiter

This page was last updated on: August 4, 2003