Okay, short story a business can't just "pay you in dividends" because there is very strict law around the issuance of dividends. If you already owned enough of the company that you could be effectively paid via your stock, you would be accepting stock options as a major part of your compensation package, not dividends.

(this is a simplification assuming only one class of stock, but) If they issue dividends, they go out to everyone who owns stock at the same ratio. You don't just get to issue dividends to one person.

What you are talking about is a structural feature that typically only corporate sole proprietors get to take advantage of, and they have better ways to pull a sneaky on the irs. Like seriously, you're throwing in some additional taxes that don't need to be paid in there compared to if we just did a disbursement. It all depends what your goals are.