They figured out how to sneak 'colored only' water fountains back into the state

It's easy for Americans like me to forget the recent history of drugs in China being used to topple a government.

>They are not evading taxes. They pay their business taxes, they just don't draw a salary.

If they want a salary they should pay a salary. And taxes.

> Nothing illegal there.

Incorrect, fabricating a loan application is fraud.

Fraud is fraud.

If a business owner wants income they should pay themselves and pay taxes on this income.

Your made up scenario is illegal twice, for tax evasion and fraud.