1. because if i trade share personally I become a share trader and the my long term investments capital gains become counted as income and thus taxable. If i trade thru the company - the company is the shareholder and I am not. thereby my trading does not contaminate my long term positions (which incidently are also in a company - see next reason).
2. companies only pay 33% tax. This is less than my personal 39% rate. this means i get to keep the 6% difference as capital to use to investment instead of paying the IRD - sure I will need to pay the 6% if the companies deide to pay a dividend, however this will not happen for a very long term. to demonstrate the power of this - assume 10% annual return on capital (all assessed as income - as it is for a trader), and the investment period is 10 years and the two tax rates are 33% and 39%. At the end of ten years the difference in return from $1 invested is 1.913 compared to 1.808.
as you guys all make stellar returns - my 10% assumption is very pedesitian and the benefit will be much greater.
cheerio
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