Final answer:
In a corporation, contributed capital and retained earnings are separate accounts, with earnings distributed to shareholders as dividends. Corporations are owned by shareholders who have limited liability, and profits can be either reinvested or shared among them.
Step-by-step explanation:
In the context of businesses and their financial structures, contributed capital and retained earnings are separate accounts in a corporation. In a corporation, distributions to shareholders are commonly referred to as dividends. Unlike sole proprietorships or partnerships where the business is directly owned by individuals or a group of partners, a corporation is a legal structure where the company is owned by its shareholders, who have limited liability for the company's debts.
Corporations raise capital by selling stocks, and they are governed by a board of directors elected by the shareholders. The profits a corporation makes after all expenses and taxes can be retained within the company as retained earnings for future investment or distributed to shareholders as dividends. This clear distinction between contributed capital, retained earnings, and the distribution of dividends is a defining feature of the corporate business structure.