The most typical way to launder money is to set up a legitimate business, cook the books so it looks like you've made more money than you have, and funnel these elicit gains through said legitimate business.
About any legitimate business will work, as long as you don't funnel more money than the authorities can believe the business could make.
It isn't done to avoid paying taxes. It is done so criminals can pay taxes on their elicit gains, so they don't wind up in prison for tax evasion.
For example, if the IRS can prove you've spent more on stuff: cars, houses, etc than you pull in over the course of a year, you're liable to wind up in prison like Al Capone.
However, if you have a legitimate business to funnel your money through, you can spend your Ill gotten gains.