Hi @sharley0716 -  

I agree with @mcwagner is good answer and @stenizet is good further clarification. 

S Corp Shareholder Equity might include:    

- SH Investments (Credit balance) Incoming $

- SH Distributions (Debit balance) Outgoing $

- Retained Earnings (accumulated profit/loss from Income statement every year, so CR or DR)

Distributions paid out should not be more than the Net credit balance of Equity (all 3 accounts).

Further, since each shareholder may have invested a different amount or already taken some Distributions during the year, each SH has their own "basis" for how much they can take out in Distributions each year.

Each SH can only take out their net credit balance.

- SH Investments (Credit balance) Incoming $

- SH Distributions (Debit balance) Outgoing $

- Retained Earnings (Their share after split up)

Minus any Distributions they may have taken earlier in the year.

The attached might help make this more clear and helps to setup proper accounts to keep separated.

Also agree better to do a loan than submit tax return with negative equity.