$100 -> corp. $90 -> expenses, $10 -> profit -> shareholders dist. $4 -> personal income tax.
In principal it's the same. Path 1 is easier to dodge, because what constitutes "expenses" is hard to define, but distributions are obvious. And the numbers don't have to add to 100. So reality looks more like:
$100 -> corp. $90 -> expenses, $10 -> profit -> shareholders dist. $4 -> personal income tax.
In principal it's the same. Path 1 is easier to dodge, because what constitutes "expenses" is hard to define, but distributions are obvious. And the numbers don't have to add to 100. So reality looks more like:
$100 -> corp. $95 -> "expenses", $5 -> "profit". $2 -> corp tax, $8 -> shareholders dist.
vs
$100 -> corp. $95 -> "expenses", $5 -> "profit". $10 shareholders dist. $4 -> personal income tax.
And this is why you want to tax at the distribution level.