Find how much you can take out of the business without straining cash, your tax reserve, or your loan covenants.
The cash test starts with cash on hand and subtracts minimum operating cash, the reserve for estimated taxes coming due, and payments already committed before your next big collections.
If you enter a net worth covenant, the covenant test is your tangible net worth minus the loan’s minimum, because every dollar distributed reduces net worth by a dollar. If your loan agreement caps distributions directly, that cap is a third test.
The safe amount is the lowest of the tests that apply, and never less than zero. More on S-corp distributions.
This is a planning estimate, not tax advice. Owners of S corporations also need to pay themselves reasonable compensation and keep distributions in proportion to ownership; your tax adviser can confirm both. See how we build this into reporting in owner distribution planning.
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