I am currently leaving the money in my business checking and drawing as needed debiting the retained earnings account. Also agree tax person s/b tracking your Basis, which may differ slightly from above, but DR Debit must not exceed Credit balances. There is no such thing as retained earnings in a sole prop or partnership. Green Day Corporation has outstanding 400,000 shares of $10 par value common stock. What Is the Journal Entry if a Company Pays Dividends With Cash? Fund Services - Client Facing Account Manager The retained earnings (profits) will be pass through taxable income on my personal taxes for last year and thereforecabable of being distributed out to the shareholders (just me). The basics of S corporation stock basis - Journal of Accountancy 318), and each owns 200 shares. S Corp Equity Section - LLC to S Corp Balance Sheet Issues - WCG CPAs My question is more of a bookkeeping one. When you spend funds as Distribution, that reduces Equity. But a shareholder distribution is not meant to replace the owner's draw. A Comprehensive Guide to LLC Owner Withdrawals, Profit Distributions S-Corp Shareholder Loans - Mistakes and How to Avoid Them - Ask Spaulding Due to these differences, if theS corpwishes to revert back into a C corp, the same retained equity account cannot continue being used. In an s-corp there are no owner equity accounts, you have shareholder capital and additional shareholder paid-in capital accounts.Those capital accounts can not be used the same way equity accounts are used in a sole proprietor or partnership. Technically speaking, an S corp doesnt pay dividends since the profits and losses of the corporation are passed on to the owners. 301 is considered a disproportionate distribution in violation of the identical-distribution rules under Regs. There are generally two ways to get money into an S-Corp - through a capital contribution (equity) or loans (liabilities). The partners can take the money out of business based on the agreement. Taxpayer received PPP loan, filed waiver and was approved by SBA.