Anyway, we are an S Corp that is making a distribution. My understanding is that, if we have profit, the first part of the distribution is to come out of retained earnings and the remainder, if the distribution is more than retained earnings, is to come out of the profits as a dividend (all in proportion to shares owned). Am I right or wrong? Please explain to me if I am wrong.
Either way, how is this generally booked and do I send the shareholders a 1099-DIV (and only in the amount that is classified as dividends, right?)?
I feel stupid having to ask a question here, but would greatly appreciate the help.