For this: "Retained "earnings" ALSO get closed to each shareholder's equity account."

And this: "These are two shareholders."

For mvp using QB, the Equity accounts would look something like this:

OBE <== never post here and it needs to be 0

Shareholder 1 <== parent level Equity

Sublevels: SH1 Distributions and SH1 Equity

Shareholder 2 <== parent level Equity

Sublevels: SH2 Distributions and SH2 Equity

Now you have Clarity. You issue distributions from their specific Distribution subaccount. You "roll up" that negative as of the first date of the new fiscal year to their specific equity subaccount. You would also split the Retained Earnings to each Equity subaccount for that date, so that the new year starts with $0 in RE (it's fully allocated to each shareholder).

"you technically need to put them as loans from the business"

Are you allowing them to take distributions not pro rata to their shares held?