I am buying into a physician practice organized as an S Corp. The Corp recently bought out 4 of 7 partners due to retirement. The buyout was for 25% of a partner's share each year for 4 years. For my buy in the group is proposing a flat buy in roughly equal to the amount of 1 year of partner income, payable over 4 years via a loan from the group.
For a number of reasons, this system doesn't seem to make much sense to me compared to the structure proposed at
https://www.acponline.org/system/fil...ncome_dist.pdf
Said structure would establish a nominal price to the shares with an employment agreement stating a pre tax 25% reduction in income for 4 years. Likewise at retirement, a buy back of nominally priced shares with a deferred compensation of 25% over 4 years.
My question is, do I understand correctly that S Corp partners must be paid in proportion to their shareholding? Would a pretax salary deduction therefore not work in an S Corp?