TN BUSINESS AND LAW TEST PAPER 2025/2026
QUESTIONS WITH SOLUTIONS RATED A+
✔✔What are the advantages of an LLC - ✔✔Limited disclosure of owners
Limited documentations
No advance IRS filings
No public disclosure of finances
Limited liability for managers and members
ability to delegate management to nonmember
✔✔Describe the ownership, liability, formation docs, tax, and management of a sole
proprietorship - ✔✔One owner
unlimited liability
DBA Filing
Entity not taxed. Profit/losses claimed on personal
owner
✔✔Describe the ownership, liability, formation docs, tax and management of a General
Partnership - ✔✔Unlimited # of general partners
unlimited liability
General Partner agreement
Entity not taxed. Profit/losses claimed on general partner tax returns
General Partners
✔✔Describe Limited Partnership (table) - ✔✔Unlimited # of partners
General Partners- all liability Limited Partners- none
Limited Partner Certificate and Agreement
Profit/losses claimed by partners
General Partners
✔✔Describe LLC (table) - ✔✔Unlimited # of members
No liability
Articles of organization, operating agreement
Profit/losses claimed by members
Manager members in operating agreement
✔✔Describe a C Corp (table) - ✔✔Unlimited # of shareholders
no liability
Article of Inc., Bylaws, Organized Board Resolution, Stock certificate, stock ledger
Corporation is taxed and the earnings of shareholders (double Taxation)
Board of Directors
✔✔Describe an S Corp (table) - ✔✔Up to 100 shareholders
no liability
,Articles of incorporation, bylaws, organized board resolution, Stock Certificate, Stock
Ledger, IRS & State S corp election
✔✔What is a joint venture - ✔✔A special business arrangement where 2 or more
businesses undertake a project
✔✔Where is the management assigned in a joint venture - ✔✔To an individual or to one
company
✔✔What does the Arkansas State Statue 17-25-311 require for a joint venture -
✔✔Prior to a joint venture engaging in or offering contract work in Arkansas each
contracting party shall be properly licensed or a proper contracting license be obtained
in the name of the joint venture
✔✔What is a trademark - ✔✔Word, name, symbol, sound or color to represent and
distinguish a company's product or services. Not the same as a trade name
✔✔Can a trade name be filed as a trademark and at what level can a trademark be filed
- ✔✔Yes
state and federal
✔✔What does the Arkansas Secretary of State, Business and Commercial services
allow you to file for your business? - ✔✔File articles of organization or incorporation
determine name availability for corps & LLCs
File foreign entities seeking authority to transact business application
File Annual Reports
✔✔how long can a corporate name be reserved through Secretary of State - ✔✔By
completing application and payment of $25 you can reserve the corp name for 120 days
✔✔Can a corporation do business under a fictitious name - ✔✔Yes if first filed with the
state
Domestic corporations must also file with the county clerk unless located in Pulaski
County.
✔✔Can a contractor do business under a fictitious name - ✔✔Not unless fictitious name
is registered with the AR Contract Licensing Board
✔✔Who registers the names of General Partnerships and Sole Proprietors - ✔✔Circuit
Clerk
✔✔What is the major purpose of Licensing - ✔✔To protect the health and safety and
welfare of the public
,✔✔How does licensing protect the safety, health, and welfare of the public -
✔✔Entrance Requirements: ensures min set of qualifications (ie experience/training)
Standards of Practice: required to adhere to standards of practices established by law
and ensures appropriate level of quality
Disciplinary Authority: Statues & rules define illegal and prohibited activities.
✔✔When is a commercial contracting license required - ✔✔On jobs that are $50,000 or
more labor and material
✔✔Who are the exemptions for a commercial contractor's license on a job $50,000 or
more - ✔✔Architects and Engineers
Manufactures
Subcontractors if registered with the board
Federal Government Contracts
✔✔What are the penalties for completing a job of more than $50,000 without a
commercial contractors license - ✔✔Misdemeanor charge
$100-$400 per day not to exceed 3% of the total job
✔✔Name types of insurance and minimum coverage for each one - ✔✔Commercial
General Liability including premises- operations products/ completed operations,
contractual insurance, Property damage, independent contractors, and bodily injury (
min coverage $3,000/$3,000)
Automobile Liability (owned, not owned, and rented) min coverage
$3,000,000/$3,000,000
Workers compensation and occupational diseases (min coverage is as required by
applicable laws
Employers Liability $3,000,000
✔✔What is all risk builders insurance - ✔✔Form of property insurance that covers
property owners and builders for buildings under construction. Typically covers
machinery, equipment, materials, supplies, and fixtures that are apart of the structure
✔✔What is inland marine/ equipment theft insurance - ✔✔type of insurance that you
can purchase for your tool sand equipment; also provides coverage for goods in transit
and projects under construction.
✔✔Does theft raise insurance premiums - ✔✔Yes
✔✔What is an Equipment Floater Policy - ✔✔Inland marine insurance for direct physical
loss to equipment and is designed to cover mobile equipment while it is stored on site,
in transit, or at temporary job sites.
, ✔✔What is Commercial General Liability insurance and what does it cover - ✔✔Offers
basic liability coverage for 4 types:
Bodily injury that results in actual physical damage or loss for individuals who are not
employees
Damage or loss to property not belonging to business
Personal injury, including slander and reputation
Advertising injury, including charges of negligence that result from a promotion of goods
and services
✔✔What does liability insurance protect from - ✔✔3rd party claims that arise from
alleged negligence resulting in bodily injury or property damage
✔✔When is key man life insurance beneficial - ✔✔When your company depends on
specific individuals for continuing success of your business
✔✔What does workers compensation cover - ✔✔Provides coverage for employees
injured on the job
✔✔Who purchases workers compensation insurance - ✔✔The employer, never paid by
employees
✔✔What does AR Code Ann 11-9-401 require workers compensation coverage -
✔✔Employers engaged in building or repairs with 2 or more employee are required
if the employer is a contractor who subcontracts and has one or more employees
required
if the employer is a subcontractor with one or more employees required
✔✔What is a bond - ✔✔A risk transfer mechanism between a surety bonding company,
the contractor, and the project owner
✔✔Name the different types of construction bonds - ✔✔Bid Bond
Performance Bond
Payment Bond
Maintenance Bond
Completion bond
fidelity bond
lien bond
subcontractor bond
✔✔What is a bid bond - ✔✔guarantees that the contractor will do the work at the
submitted bid price, enter into a contract with the owner, and furnish the required
payment and performance bonds. Serves as a deterrent to unqualified and frivilous
bidders.
QUESTIONS WITH SOLUTIONS RATED A+
✔✔What are the advantages of an LLC - ✔✔Limited disclosure of owners
Limited documentations
No advance IRS filings
No public disclosure of finances
Limited liability for managers and members
ability to delegate management to nonmember
✔✔Describe the ownership, liability, formation docs, tax, and management of a sole
proprietorship - ✔✔One owner
unlimited liability
DBA Filing
Entity not taxed. Profit/losses claimed on personal
owner
✔✔Describe the ownership, liability, formation docs, tax and management of a General
Partnership - ✔✔Unlimited # of general partners
unlimited liability
General Partner agreement
Entity not taxed. Profit/losses claimed on general partner tax returns
General Partners
✔✔Describe Limited Partnership (table) - ✔✔Unlimited # of partners
General Partners- all liability Limited Partners- none
Limited Partner Certificate and Agreement
Profit/losses claimed by partners
General Partners
✔✔Describe LLC (table) - ✔✔Unlimited # of members
No liability
Articles of organization, operating agreement
Profit/losses claimed by members
Manager members in operating agreement
✔✔Describe a C Corp (table) - ✔✔Unlimited # of shareholders
no liability
Article of Inc., Bylaws, Organized Board Resolution, Stock certificate, stock ledger
Corporation is taxed and the earnings of shareholders (double Taxation)
Board of Directors
✔✔Describe an S Corp (table) - ✔✔Up to 100 shareholders
no liability
,Articles of incorporation, bylaws, organized board resolution, Stock Certificate, Stock
Ledger, IRS & State S corp election
✔✔What is a joint venture - ✔✔A special business arrangement where 2 or more
businesses undertake a project
✔✔Where is the management assigned in a joint venture - ✔✔To an individual or to one
company
✔✔What does the Arkansas State Statue 17-25-311 require for a joint venture -
✔✔Prior to a joint venture engaging in or offering contract work in Arkansas each
contracting party shall be properly licensed or a proper contracting license be obtained
in the name of the joint venture
✔✔What is a trademark - ✔✔Word, name, symbol, sound or color to represent and
distinguish a company's product or services. Not the same as a trade name
✔✔Can a trade name be filed as a trademark and at what level can a trademark be filed
- ✔✔Yes
state and federal
✔✔What does the Arkansas Secretary of State, Business and Commercial services
allow you to file for your business? - ✔✔File articles of organization or incorporation
determine name availability for corps & LLCs
File foreign entities seeking authority to transact business application
File Annual Reports
✔✔how long can a corporate name be reserved through Secretary of State - ✔✔By
completing application and payment of $25 you can reserve the corp name for 120 days
✔✔Can a corporation do business under a fictitious name - ✔✔Yes if first filed with the
state
Domestic corporations must also file with the county clerk unless located in Pulaski
County.
✔✔Can a contractor do business under a fictitious name - ✔✔Not unless fictitious name
is registered with the AR Contract Licensing Board
✔✔Who registers the names of General Partnerships and Sole Proprietors - ✔✔Circuit
Clerk
✔✔What is the major purpose of Licensing - ✔✔To protect the health and safety and
welfare of the public
,✔✔How does licensing protect the safety, health, and welfare of the public -
✔✔Entrance Requirements: ensures min set of qualifications (ie experience/training)
Standards of Practice: required to adhere to standards of practices established by law
and ensures appropriate level of quality
Disciplinary Authority: Statues & rules define illegal and prohibited activities.
✔✔When is a commercial contracting license required - ✔✔On jobs that are $50,000 or
more labor and material
✔✔Who are the exemptions for a commercial contractor's license on a job $50,000 or
more - ✔✔Architects and Engineers
Manufactures
Subcontractors if registered with the board
Federal Government Contracts
✔✔What are the penalties for completing a job of more than $50,000 without a
commercial contractors license - ✔✔Misdemeanor charge
$100-$400 per day not to exceed 3% of the total job
✔✔Name types of insurance and minimum coverage for each one - ✔✔Commercial
General Liability including premises- operations products/ completed operations,
contractual insurance, Property damage, independent contractors, and bodily injury (
min coverage $3,000/$3,000)
Automobile Liability (owned, not owned, and rented) min coverage
$3,000,000/$3,000,000
Workers compensation and occupational diseases (min coverage is as required by
applicable laws
Employers Liability $3,000,000
✔✔What is all risk builders insurance - ✔✔Form of property insurance that covers
property owners and builders for buildings under construction. Typically covers
machinery, equipment, materials, supplies, and fixtures that are apart of the structure
✔✔What is inland marine/ equipment theft insurance - ✔✔type of insurance that you
can purchase for your tool sand equipment; also provides coverage for goods in transit
and projects under construction.
✔✔Does theft raise insurance premiums - ✔✔Yes
✔✔What is an Equipment Floater Policy - ✔✔Inland marine insurance for direct physical
loss to equipment and is designed to cover mobile equipment while it is stored on site,
in transit, or at temporary job sites.
, ✔✔What is Commercial General Liability insurance and what does it cover - ✔✔Offers
basic liability coverage for 4 types:
Bodily injury that results in actual physical damage or loss for individuals who are not
employees
Damage or loss to property not belonging to business
Personal injury, including slander and reputation
Advertising injury, including charges of negligence that result from a promotion of goods
and services
✔✔What does liability insurance protect from - ✔✔3rd party claims that arise from
alleged negligence resulting in bodily injury or property damage
✔✔When is key man life insurance beneficial - ✔✔When your company depends on
specific individuals for continuing success of your business
✔✔What does workers compensation cover - ✔✔Provides coverage for employees
injured on the job
✔✔Who purchases workers compensation insurance - ✔✔The employer, never paid by
employees
✔✔What does AR Code Ann 11-9-401 require workers compensation coverage -
✔✔Employers engaged in building or repairs with 2 or more employee are required
if the employer is a contractor who subcontracts and has one or more employees
required
if the employer is a subcontractor with one or more employees required
✔✔What is a bond - ✔✔A risk transfer mechanism between a surety bonding company,
the contractor, and the project owner
✔✔Name the different types of construction bonds - ✔✔Bid Bond
Performance Bond
Payment Bond
Maintenance Bond
Completion bond
fidelity bond
lien bond
subcontractor bond
✔✔What is a bid bond - ✔✔guarantees that the contractor will do the work at the
submitted bid price, enter into a contract with the owner, and furnish the required
payment and performance bonds. Serves as a deterrent to unqualified and frivilous
bidders.
