I don't know how it is for S-corps with passthrough, but for LLCs opting for passthrough taxation results in exactly what you describe: you owe taxes even thoug

I don't know how it is for S-corps with passthrough, but for LLCs opting for passthrough taxation results in exactly what you describe: you owe taxes even though the profits were not distributed to you because the company decided to reinvest. Search for "allocated profits", "distributed profits", and "phantom income". You owe taxes on allocated profits, not distributed profits. Opting to be taxed as a coporation (or C-corp) avoids all these problems (at the expense of "double taxation").