Business & farm

@PMT_2021 Your K-1 has to do with corporate income, not necessarily distributions.  They are two different things, though many treat them as if they were the same.  Corporate income is what the business is considered to have made, which gets passed through to you via Schedule K-1, where you then report on your personal income tax return for taxation.  This corporate income is then "transferred" (for lack of a better term) to your capital account, where you can then distribute it to yourself.  Since it's the corporate income, and not the distributions themselves that are taxed on your personal return.  Your capital account serves almost like a bank account.  As long as you have enough equity (or basis), then your distributions are a tax-free return of capital.

But before you can make distributions, you must ensure to pay yourself "reasonable compensation".  Reasonable compensation basically means wages, but it can also refer to things like 401(k) deferrals, medical premiums for a 2% (or greater) S-Corp shareholder, FSA childcare deferrals, etc.  If you have employees, you will no doubt have a set schedule to pay them.  However, if you are the only employee of the S-corp, what matters is that you pay yourself "reasonable compensation" for the year.  It is not inconceivable for that compensation to be paid yearly, as long as it is "reasonable".  After reasonable compensation has (or will) be paid, then you can elect to have distributions made.

As far as to what "reasonable" compensation is, you can ask:  How much would a company pay me for the job that I am doing?  You can use the 401(k) deferrals as well as S-Corp Medical Premiums and other similar types of compensation to arrive at your final numbers to determine whether or not you are paying "reasonable compensation" or not.  And most will try to use the low-end figure for someone working at that same type of job to determine whether or not their compensation is "reasonable" or not.