Hi Mike,
Thanks for your response. I was just confused off of an article that I read on upcounsel that was written which claimed that:
"After paying its bills and debts and distributing profits to shareholders and owners, the C corporation can invest the remaining funds in the company. This reinvested amount is a type of equity called retained earnings.
Corporations are required to pay income tax on their profits after expenses. If no profit is recorded, no income tax is paid. Retained earnings can be kept in a separate account and are tax-exempt until they are distributed as salary, dividends, or bonuses"
For some reason I incorrectly interpreted the "if no profit is recorded" as "if no wages or distributions are made no income tax is paid", that the profit could be classified as retained income.
Now I understand that retained earnings are whatever money is left AFTER taxes are initially paid on the year's profit.
Thank you both the clarification.
