Business & farm

This is an old thread and going forward it is best if you start your own new thread.

Some comments on your questions:

1. It is good that you are taking a salary, as reasonable compensation is required to be paid to employee-shareholder's.  "Reasonable" is not defined and is based on facts and circumstances.
2. Distributions, in general, are just paid out as a check; no withholding.
3. As an S corporation, the entity is a pass-through, and as such, in general does not pay tax at the entity level.  So you are correct, after completing the form 1120-S, you will receive a K-1 with your share of the earnings.  I am assuming based on your facts that you are the sole shareholder?  If so, then you will be taxed on the profits.
4. Most pass-through entities pay out distributions to cover shareholder taxes on their share of the earnings.  This is typically a combined figure of federal and state tax; ie 35% (30 federal and 5 state as an example).
5. There will be times that you want to take out more, but as you say, you need to leave sufficient cash in the company to run the business.
6. As a shareholder of an S corporation, you need to maintain your tax basis in the S corporation.  This is extremely important.
7. S corporations should be tracking their AAA (which is part of the form 1120-S tax return) and this account cannot go negative by distributions.  This is not the same as your individual tax basis.
8. As you can see, these pass-through entities can get complicated quickly, regardless of the size of the business.  As such, it may be good to have a one on one with a tax professional to get a good understanding of how the S corporation works from a tax standpoint.