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Interest is deductible as a business expense and dividends are not.

Now here's the flip side: Ever see the movie Goodfellas? There was a scene where someone took Paulie on as an investor in a restaurant. In investment terms, he sold a bond to Paulie. Now, every week he's got to pay Paulie. No matter how bad things were..."The restaurant caught fire? Pay me." And that's what you have to do when you sell bonds: on the date the interest payment is due, you have to pay your investors. If you sell stock and for some reason you absolutely can NOT pay a dividend, you aren't required to. (This will probably cause your investors to sell.)

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