I think something that often gets overlooked in this topic is that when money comes out of the corporation into the hands of individuals it's taxed again.
In theory these 2 situations should be equal.
An individual operates a sole proprietorship, they pay normal personal income tax on that profit. Say the total tax paid is $10
An individual operates an incorporated businesses, they pay corporate tax on the profits, sat $3. They then pay the profits to themselves in the form of a dividend and that dividend is then taxed at personal income tax rates, say $7.
"In theory" those 2 scenarios should have a "total tax paid" bill that is exactly equal, $10 = $2 + $7. The trick is that any time you start talking about a significantly large enough amount of money you introduce the ability to plan for the future. Hiring an expert to plan your deals to minimise taxes. Both of these organizations can do this. The individual and the corporation. However because this activity is not exactly cheep it is more commonly seen in corporations because they tend to be larger.
People will often site favorable tax treatment of dividends as a "problem" with the system. Dividends are taxed differently than normal income because that money has already been taxed. In Canada we bump up the taxable dividend amount to be more than what cash was actually received and then give a tax credit for taxes already paid. I'm not sure how it's done in the US but I'm sure there is an equivalent system
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