BizEquity Knowledgebase Support Center

Does Officer Compensation Include All Officers or Only Owners?

The answer is that this line should include all of the actual compensation paid to a single owner working on a full-time basis. If there are multiple owners and they are being paid more or less than a market wage, then another adjustment is required. For example, if a second owner is being paid more than a market compensation level in the amount of say $50K, then the officer compensation amount should be increased by $50K. If the second owner is being paid less than a market compensation, the officer compensation amount should be decreased by $50K.

All of this is to reach an earnings level that will be available to a hypothetical new owner-operator/buyer.

In summary, include all of the actual compensation paid to a single or primary owner-operator (including salaries, benefits) and then adjust this amount if the other two owners are being paid more or less than a market level compensation. Think in terms of a hypothetical buyer coming in and replacing the primary owner and having to hire replacements for the other two owners who are departing.