Tennessee Contractor Business and Law Study Guide:
Questions & Answers
Business Organization & Planning
1. What are the most common factors attributed to business failure?
A. High taxes and government regulations
B. Long hours and lack of employees
C. Poor planning and inadequate management
D. High startup costs and lack of capital
Correct Answer: C
Rationale: The sources state that poor planning and inadequate management are
the primary factors in business failure.
2. Which business structure is characterized by a single individual owning all
assets and being 100% responsible for all decisions?
A. C Corporation
B. General Partnership
C. Limited Liability Company
D. Sole Proprietorship
Correct Answer: D
Rationale: A sole proprietorship is defined as a business with one individual
owner responsible for all decisions and assets.
,3. What is a major disadvantage of a sole proprietorship?
A. Double taxation
B. Complex record-keeping
C. Unlimited liability
D. High startup costs
Correct Answer: C
Rationale: Unlimited liability is listed as a primary disadvantage for this business
form.
4. To qualify as an S Corporation, what is the maximum number of shareholders
permitted?
A. 50 B. 75
C. 100
D. 500
Correct Answer: C
Rationale: An S Corporation must have no more than 100 shareholders who are
U.S. citizens or legal residents.
5. Which document serves as a planning tool, a benchmarking tool, and a
document for loans or investors?
A. Operating Agreement
B. Business Plan
, C. Articles of Incorporation
D. Project Manual
Correct Answer: B
Rationale: These three items are identified as the "key functions" of a business
plan.
6. Which legal entity is formed specifically on a project-by-project basis to
integrate the resources of two or more companies?
A. S Corporation
B. General Partnership
C. Joint Venture
D. Limited Liability Company
Correct Answer: C
Rationale: A joint venture is formed to integrate attributes and resources of
multiple companies for a specific project.
II. Licensing and Risk Management
7. What is the primary purpose of licensing contractors in Tennessee?
A. To generate tax revenue for the state
B. To protect the health, safety, and welfare of the public
C. To limit the number of contractors in the market
D. To ensure all contractors have insurance
Questions & Answers
Business Organization & Planning
1. What are the most common factors attributed to business failure?
A. High taxes and government regulations
B. Long hours and lack of employees
C. Poor planning and inadequate management
D. High startup costs and lack of capital
Correct Answer: C
Rationale: The sources state that poor planning and inadequate management are
the primary factors in business failure.
2. Which business structure is characterized by a single individual owning all
assets and being 100% responsible for all decisions?
A. C Corporation
B. General Partnership
C. Limited Liability Company
D. Sole Proprietorship
Correct Answer: D
Rationale: A sole proprietorship is defined as a business with one individual
owner responsible for all decisions and assets.
,3. What is a major disadvantage of a sole proprietorship?
A. Double taxation
B. Complex record-keeping
C. Unlimited liability
D. High startup costs
Correct Answer: C
Rationale: Unlimited liability is listed as a primary disadvantage for this business
form.
4. To qualify as an S Corporation, what is the maximum number of shareholders
permitted?
A. 50 B. 75
C. 100
D. 500
Correct Answer: C
Rationale: An S Corporation must have no more than 100 shareholders who are
U.S. citizens or legal residents.
5. Which document serves as a planning tool, a benchmarking tool, and a
document for loans or investors?
A. Operating Agreement
B. Business Plan
, C. Articles of Incorporation
D. Project Manual
Correct Answer: B
Rationale: These three items are identified as the "key functions" of a business
plan.
6. Which legal entity is formed specifically on a project-by-project basis to
integrate the resources of two or more companies?
A. S Corporation
B. General Partnership
C. Joint Venture
D. Limited Liability Company
Correct Answer: C
Rationale: A joint venture is formed to integrate attributes and resources of
multiple companies for a specific project.
II. Licensing and Risk Management
7. What is the primary purpose of licensing contractors in Tennessee?
A. To generate tax revenue for the state
B. To protect the health, safety, and welfare of the public
C. To limit the number of contractors in the market
D. To ensure all contractors have insurance
