My question is, do I understand correctly that S Corp partners must be paid in proportion to their shareholding?===========correct. An s corp shareholder/employee is not usually called a partner, it is an s corp shareholder/employee; in general, unlike regular corps, an "S corp" does not pay corporate income taxes on its profits. Instead, thes corp profits are allocated to shareholders according to their stake in the company, and the shareholders report those profits as taxable income on their personal returns on 1040. This is the case regardless of whether the shareholders actually received any money. If an S corp with 1k shares has a $100k profit, then shareholders must report and pay taxes on $100 in income for every share they own.An S corp shareholder who performs more than minor services for the corporation will be its employee for tax purposes, as well as a shareholder. However, an S corp must pay reasonable employee compensation ,subject to employment taxes, I mean social taxes, to a shareholder-employee in return for the services the employee provides before a distribution ,not subject to employment taxes, may be given to the shareholder-employee.
Would a pretax salary deduction therefore not work in an S Corp?====================as mentioned above:yes.however it depends. What I mean is that unlike the benefits costs paid by regular W-2 shareholders employees of an s corp, which are pre-tax deductions in payroll, benefits paid by an s corp for its owners ,any shareholders who own more than 2% of the company, are considered part of the owner's taxable wages, and aren't deducted in payroll.