$100 -> corp. $90 -> expenses, $10 -> profit. $4 -> corp tax, $6 -> shareholders dist. $100 -> corp. $90 -> expenses, $10 -> profit -> shareholders dist. $

$100 -> corp. $90 -> expenses, $10 -> profit. $4 -> corp tax, $6 -> shareholders dist. $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.