Eug
Senior Member
Indeed. Most people can't afford to keep money in the corporation doing nothing. Most people would have to flow-through almost all that cash anyway, and would end up paying nearly as much personal income tax as before, yet have the extra overhead (both in terms of money and in terms of hassle) of having the corporation.Even if no rules were imposed on holding investments in corporations to take advantage of lower taxes, people will eventually withdraw these funds and pay personal income tax. This is because the only reason to save/invest is to delay consumption until the future. In order to consume, money must be withdrawn from the corporation, as personal expenses are taxable benefits. You can't live rent-free in a house owned by a corporation you in turn own. Same with a car, vacations, etc. etc.
Corporations also have a tendency of getting audited, if my friends with corporations-used-as-tax-shelters are any indication. Even when all the transactions are 100% legit, the audit is a royal PITA.