Negative retained earnings doesn't bode well for attracting lenders for financing either.
With a negative balance in retained earnings, companies also typically can't make dividend payments to shareholders or owners. The only common exception is when companies are dissolving or liquidating and pay dividends out of cash balances.
These may be requested by HMRC to prove the payment was a dividend and not salary which would be taxed as PAYE.
Even if the company only has one director who is also the shareholder a set of meeting minutes must be recorded.He has been a college marketing professor since 2004.Kokemuller has additional professional experience in marketing, retail and small business.A deficit in retained earnings means the company essentially has nothing to invest in growth.This can lead to missed opportunities in emerging markets and inhibit production and development.Paying a dividend can be more tax efficient than paying normal PAYE.