A distribution is profit paid out to the owners of a corporation.
How it differs from a wage
A wage is paid for work and carries payroll tax. A distribution is paid for ownership and does not.
That difference is why the two cannot be freely swapped. Paying an owner entirely in distributions avoids payroll tax on work that was genuinely performed, which is the arrangement reasonable compensation rules exist to prevent.
It follows ownership
Distributions are normally made in proportion to ownership percentage. An owner holding forty per cent receives forty per cent of what is distributed.
It comes out of accumulated profit
There has to be profit to distribute. Money paid out beyond what the business has earned is not a distribution but a return of capital, and it has different tax consequences.
What remains after distributions is retained earnings — the profit the business has kept.