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財管 CH1 The Corporation (Management Team (Board of directors (Make rules…

- - - - GP:
        Personally liable for the firm’s debt obligations
        Run the business
      - LP:
        Limited to their investment
        Only invest but do not run the business
  - - - Must be legally formed
      - Create a corporate charter that specifies the initial rules that govern how the corporation is run
    - - Shareholder / stockholder / equity holder owns the share of the stock and be entitled to dividend payments
      - No limitation to the owners
    - - C Corporations:
        Double taxation: Corporate Tax + Dividend Income Tax
      - S Corporations:
        No corporation tax but are allocated directly to shareholders based on their ownership share
- - - - Weigh the costs and benefits of all investments and projects
      - Decide which of them qualify as good uses of the money
    - - Decide how to pay for the investments (equity vs debt)
    - - make sure that access to cash does not hinder the firm’s success
- - - - Too close: will not to take the risk
      - Limiting the penalty: may take excessive risk