Reply #32: Think of it like a separate legal entity

[joeglow3]

Lets say I own a C Corporation and it makes $1,000,000. Assuming a 35% corporate tax rate, I would pay $350,000 in taxes, leaving $650,000. Now, IF I distribute that money to myself, I would pay $97,500 in taxes, as an individual ($650,000 x 15%). However, if I don't not distribute that income and instead invest it back into the company, I do not pay any taxes. Taxes are only paid when I either take a distibution or sell the company.

Same thing with this. The company pays taxes in China, but defers taxes in the US until it either distributes the money or sells the company. Also, keep in mind that the company gets a tax credit for the taxes paid to China, thereby preventing the income at Chinese PLUS US rates.