Untaxing-IV (Katchings’ Laws) ch 18: Corporate Structures
The C-Corporation structure of the public company is not something that is etched in stone contrary to the sincere belief of CPAs and business lawyers who fail to investigate.
The accepted and here supported goal of the public company is to maximize the shareholder’s value. This means continuously returning profits to the owners as dividends, which produce the equity and market values.
The election of the corporate structure that best maximizes shareholder value is a fiduciary responsibility of the CPAs, lawyers, and the entrepreneurs so that lawmakers and managers do not reverse capitalism’s goal for their own high-salaried amusements or from arrogance, capriciousness or ignorance.
The election of the corporate structure is intractably tied to the tax policy of a country. The election of having a corporation domiciled in a tax haven country is one exercise in the chain of entrepreneurial responsibility.
When we examine corporations that elected to be US Real Estate Investment Trusts (REIT), US Limited Liability Companies (LLC), or to be domiciled in a Tax Haven country, we find that 99% of these public company structures have market values that are greater than their revenues (Katchings’ First Law of Capitalism), whereas 38% of the public companies without these public company taxing structures have market values that are less than their revenues.
Let’s be clear here. 99% of public companies are C-Corporations. The 62% with market values that exceed their revenues are the C-Corporations that use tax haven strategies to avoid excessive government taxes.
This tripartite REIT, LLC, Tax Haven comparison corroborates Katchings’ First Law of Capitalism that “revenue should not be greater than the public company’s market value.” A company may meet Katchings’ First Law of Capitalism, yet fail to maximize shareholder value.