Liquidating dividends effect on retained earnings
Zeroing out means to claim salaries and bonuses, plus other deductions, that significantly reduce the annual profit (retained earnings) of the corporation.
In case of the need for liquidity, the amounts taken as salary and bonus can be loaned back to the corporation.
Dividends are paid from the retained earnings account. All public corporations issue a single form of common stock and have the option of issuing one or more types of preferred stock.
Common stock confers partial ownership of the corporation and a share of earnings upon stockholders.
A regular, or C, corporation is a corporate entity that pays tax as opposed to those pass-through entities such as S Corporations, Partnerships, and Limited Liability Companies (LLCs).