FNBU 3441 Chapter Notes - Chapter 1: Sole Proprietorship, Corporate Finance, General Partnership

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Life is li(cid:373)ited to o(cid:449)(cid:374)e(cid:396)"s lifespa(cid:374) a(cid:374)d e(cid:395)uit(cid:455) is li(cid:373)ited to o(cid:449)(cid:374)e(cid:396)"s (cid:449)ealth: partnership, general partnership: all partners share gains and losses, unlimited liability for all partnership debts. Limited partnership: one or more general partners run the business and have u(cid:374)li(cid:373)ited lia(cid:271)ilit(cid:455), li(cid:373)ited pa(cid:396)t(cid:374)e(cid:396)"s lia(cid:271)ilit(cid:455) is li(cid:373)ited to the a(cid:373)ou(cid:374)t that pa(cid:396)t(cid:374)e(cid:396) contributes: corporation. Is a legal (cid:862)pe(cid:396)so(cid:374)(cid:863), sepa(cid:396)ate a(cid:374)d distinct from owners: ownership can be readily transferred (life is not limited, to(cid:272)kholde(cid:396)s ha(cid:448)e li(cid:373)ited lia(cid:271)ilit(cid:455) (cid:271)e(cid:272)ause (cid:373)o(cid:374)e(cid:455) is (cid:271)o(cid:396)(cid:396)o(cid:449)ed i(cid:374) (cid:272)o(cid:396)po(cid:396)atio(cid:374)"s name. The most they can lose is what they have invested: disadvantage: double taxation profits are taxed twice (corporate level and personal level/ when they are paid out) 1. 4 the agency problem and control of the corporation. Agency relationships: relationship between stockholders and management. Management goals: agency costs costs of conflict of interest between stockholders and management, types of direct agency costs.

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