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TN BUSINESS AND LAW EXAM
QUESTIONS WITH DETAILED VERIFIED
ANSWERS
Success Factors in Your Business Ans: organized, consistent approach
Factors in Business Failure Ans: poor planning and inadequate
management
Entrepreneur Ans: a person engaged in strategic activities that involve
initiation and development of a new business
Calculated Risk Ans: something that is well thought through where all
outcomes are considered
Rewards of Owning Your Own Business Ans: own boss, flexible time,
freedom and independence, personal satisfaction
Challenges of Owning Business Ans: long hours, manage cash flow,
payroll, overwhelming responsibility, finding/keeping employees, taxes,
government regulations
Business Plan Ans: a document that outlines business strategies and
goals
Key Functions of a Business Plan Ans: planning tool, loan or investor
document, benchmarking tool
Element of a Business Plan Ans: cover page, executive summary,
company summary, products and services, market analysis, market
strategy, financial plan
What could be a pitfall to a business plan? Ans: must portray an
accurate picture of business
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What are the different types of business structures? Ans: sole
proprietorship, partnership, c corporation, s corporation, limited liability
company
Sole Proprietorship Ans: a business that has one individual as the owner
who is responsible for 100% of the decisions made on behalf of the
business and owns all of the business assets
Advantages of a Sole Proprietorship Ans: minimal legal restrictions,
simple ownership form, low startup cost, sole owner of profits, freedom in
decision making
Disadvantages to a Sole Proprietorship Ans: unlimited liability, less
available capital, possible difficulty in obtaining long term financing,
dissolution of the business in even of owner death
Partnership Ans: a business relationship between two or more persons
who join to carry on a trade or business. each person contributes money,
property, labor, or skill, and each partner expects to share in the profits
and losses of the business.
Two types of partnership Ans: general and limited
Advantages of a General Partnership Ans: ease of formation, direct
profit rewards, larger management base than that of a sole proprietorship
Disadvantages to a General Partnership Ans: unlimited liability, potential
for disagreements, lack of continuity, difficulty in withdrawing from a
partnership
C Corporation Ans: a legal business entity that has independent
ownership of assets and liabilities from its shareholders
Requirements of C Corporation Ans: board of directors and corporate
officers, stockholders as owner of the company, board meetings, board
empowered to authorize certain actions
Advantages of a C Corporation Ans: separate legal entity, limited liability
for stockholders, unlimited life of the business, availability of capital
resources, transfer of ownership though stock
, Page | 3
Disadvantages to a C Corporation Ans: complex and expensive
organization, limitations on corporations activities and decisions by the
corporate charter, extensive record keeping and regulation, double
taxation
S Corporation Ans: a legal business entity formed under the rules of
Subchapter S of the Internal Revenue Code. It is taxed like a partnership
by passing items of income, loss, deduction, and credits through to its
shareholders to be included on their separate returns
Requirements for S Corporation Ans: one class of stock, no more than
100 shareholders who are citizens or legal residents of US, filing of IRS
Form 2553
Limited Liability Company (LLC) Ans: a legal business entity that has
characteristics of both sole proprietorships and corporations. Federal
income taxes are paid only on income distributed to members as ordinary
income. Member have protection from liability for actions taken by the
company or by other members of your company but are not protected
from liability for personal actions.
Advantages of a LLC Ans: limited disclosure of owners, limited
documentation, no advance IRS filings, no public disclosure of finances,
limited liability for managers and members, ability to delegate
management to non members
Joint Venture Ans: generally formed on a project basis in order to
integrate positive attributes and resources of to or more companies
Purpose of Licensing Ans: protects the health, safety, and welfare of the
public
Tennessee Board of Licensing Contractors Ans: regulates contracting
activities through examination, licensure, and disciplinary
TN Contractor License Requirements Ans: must have contractor license
for construction projects of $25,000 or more
TN BUSINESS AND LAW EXAM
QUESTIONS WITH DETAILED VERIFIED
ANSWERS
Success Factors in Your Business Ans: organized, consistent approach
Factors in Business Failure Ans: poor planning and inadequate
management
Entrepreneur Ans: a person engaged in strategic activities that involve
initiation and development of a new business
Calculated Risk Ans: something that is well thought through where all
outcomes are considered
Rewards of Owning Your Own Business Ans: own boss, flexible time,
freedom and independence, personal satisfaction
Challenges of Owning Business Ans: long hours, manage cash flow,
payroll, overwhelming responsibility, finding/keeping employees, taxes,
government regulations
Business Plan Ans: a document that outlines business strategies and
goals
Key Functions of a Business Plan Ans: planning tool, loan or investor
document, benchmarking tool
Element of a Business Plan Ans: cover page, executive summary,
company summary, products and services, market analysis, market
strategy, financial plan
What could be a pitfall to a business plan? Ans: must portray an
accurate picture of business
, Page | 2
What are the different types of business structures? Ans: sole
proprietorship, partnership, c corporation, s corporation, limited liability
company
Sole Proprietorship Ans: a business that has one individual as the owner
who is responsible for 100% of the decisions made on behalf of the
business and owns all of the business assets
Advantages of a Sole Proprietorship Ans: minimal legal restrictions,
simple ownership form, low startup cost, sole owner of profits, freedom in
decision making
Disadvantages to a Sole Proprietorship Ans: unlimited liability, less
available capital, possible difficulty in obtaining long term financing,
dissolution of the business in even of owner death
Partnership Ans: a business relationship between two or more persons
who join to carry on a trade or business. each person contributes money,
property, labor, or skill, and each partner expects to share in the profits
and losses of the business.
Two types of partnership Ans: general and limited
Advantages of a General Partnership Ans: ease of formation, direct
profit rewards, larger management base than that of a sole proprietorship
Disadvantages to a General Partnership Ans: unlimited liability, potential
for disagreements, lack of continuity, difficulty in withdrawing from a
partnership
C Corporation Ans: a legal business entity that has independent
ownership of assets and liabilities from its shareholders
Requirements of C Corporation Ans: board of directors and corporate
officers, stockholders as owner of the company, board meetings, board
empowered to authorize certain actions
Advantages of a C Corporation Ans: separate legal entity, limited liability
for stockholders, unlimited life of the business, availability of capital
resources, transfer of ownership though stock
, Page | 3
Disadvantages to a C Corporation Ans: complex and expensive
organization, limitations on corporations activities and decisions by the
corporate charter, extensive record keeping and regulation, double
taxation
S Corporation Ans: a legal business entity formed under the rules of
Subchapter S of the Internal Revenue Code. It is taxed like a partnership
by passing items of income, loss, deduction, and credits through to its
shareholders to be included on their separate returns
Requirements for S Corporation Ans: one class of stock, no more than
100 shareholders who are citizens or legal residents of US, filing of IRS
Form 2553
Limited Liability Company (LLC) Ans: a legal business entity that has
characteristics of both sole proprietorships and corporations. Federal
income taxes are paid only on income distributed to members as ordinary
income. Member have protection from liability for actions taken by the
company or by other members of your company but are not protected
from liability for personal actions.
Advantages of a LLC Ans: limited disclosure of owners, limited
documentation, no advance IRS filings, no public disclosure of finances,
limited liability for managers and members, ability to delegate
management to non members
Joint Venture Ans: generally formed on a project basis in order to
integrate positive attributes and resources of to or more companies
Purpose of Licensing Ans: protects the health, safety, and welfare of the
public
Tennessee Board of Licensing Contractors Ans: regulates contracting
activities through examination, licensure, and disciplinary
TN Contractor License Requirements Ans: must have contractor license
for construction projects of $25,000 or more
