Let's say I am receiving income in a corp from multiple entities for consulting services and most of the money I make I keep in my company to potentially pay out dividends in future years.
Would it make sense to split the income (and therefore the profits) between multiple corporations to keep in the lowest corporate tax brackets?
Let's say I have a yearly profit of $120,000. If the current tax brackets for corps are as follows:
Taxable income over Not over Tax rate $ 0 $ 50,000 15% 50,000 75,000 25% 75,000 100,000 34% 100,000 335,000 39% 335,000 10,000,000 34% 10,000,000 15,000,000 35% 15,000,000 18,333,333 38% 18,333,333 .......... 35%
It seems I should set up 3 corporations, have my clients pay each of them about $40,000, and thus each corporation would only get taxed 15%. Thereby saving $12,000-$23,000 in taxes.
I could easily imagine creating N number of corps and spreading profits between them all to have the lowest tax rate.
This all seems pretty easy and obvious to me, yet I don't see any advice on the subject anywhere on the internet.
Is this legal?
Am I missing something fundamental? Because otherwise, it seems like a pretty huge tax loophole that I would imagine would be heavily abused.