ESB(Answers for ESB Practice Test Entrepreneurship &
Small Business v.2 - U.S. Practice Exam 1
Training)Questions And Answers.
What is Entrepreneurship?
Entrepreneurship is setting up a business with the aim to make a profit.
You've been asked to classify several businesses as either B2B or B2C.
For each business, select B2B or B2C.
"B2B" is an acronym for "business to business," while "B2C" means "business to
consumer." B2B businesses sell products and services directly to other businesses;
whereas B2C businesses sell products and services directly to customers for personal
use. B2B sales usually require a sales tax exemption certificate from the buyer.
B2B:
-Wholesale flooring distributor (because the transition implies the materials purchased
will be resold through a retail business, such as an installer, or a store open to the
general public)
-Purchases requiring a tax exemption certificate (because the transaction states the
buyer is reselling the goods and that is why the purchase is tax exempt)
B2C:
-Chain of local grocery stores (because purchases at the store are typically made by
buyers for personal use. The number of grocery stores managed by the owner is
irrelevant)
-Motorcycle repair shop (because the service provided is typically for personal use)
You need to create a legal structure for your small business. You would like some
of the benefits enjoyed by large corporations, but do not want to be taxed twice.
You have four partners who will be shareholders. None of you plan to sell your
own shares to the public, but do want to be protected from business liabilities.
Which legal structure should you set up for your business?
S-Corporation
Explain S-Corporation, C-Corporation, Sole Proprietorship, & Limited Liability
Company (LLC)
S-Corporation:
-Offers many of the same benefits as a C Corporation, but better for smaller businesses
-100 shareholders maximum allowed. All must be U.S. citizens or residents
-Shareholders are not personally responsible for business liabilities
-Taxed once--only the shareholders pay on profits received. A separate tax return is
required for the business
C-Corporation:
-Best if the company plans to sell stock to the public someday; can issue shares to
founders, employees, and investors
-Unlimited owners (shareholders) allowed
- Shareholders are not personally responsible for business liabilities
-Taxed twice--business pays at the corporate level, and shareholders pay on income
received. A separate tax return is required for the business.
, Sole Proprietorship:
-Best if you need an easy set-up. You may still need a DBA or business license to
operate legally, but no other paperwork is
-One owner maximum
-The owner is personally responsible for business liabilities. No personal liability
protection
-Taxed once--you pay on profits in your personal tax return. Separate tax returns are
not needed
Limited Liability Company (LLC):
-Popular choice for businesses concerned about liability protection
-Unlimited owners (members) allowed. No shareholders. LLCs cannot go public
-Members are not personally responsible for business liabilities
-An LLC can choose how to be taxed by filing form 8832 with the IRS. An LLC can elect
to be taxed as a Sole Proprietorship, Partnership, S Corp, or C Corp. An LLC is not
recognized globally; you may be taxed as a corporation in other countries
For each statement about owners of equity in a business, select True or False.
True:
-A partner owns equity
-Founders own equity
False:
-All stakeholders own equity
-Contractors own equity
By default, owners of equity in a business are founders, partners, and shareholders.
Although it is possible that employees, contractors, and other stakeholders might
purchase equity or be awarded equity in a business, it is not the default.
Complete the sentence about company roles and responsibilities by selecting the
correct option from each drop-down list.
An example of ________ compensation is paying field laborers for the amount of
fruit they pick.
Piece Work
A ________ employee receives a set amount of pay each month without overtime
compensation for extra hours worked.
Salary
Employees most affected by minimum wage laws are compensated ________.
Hourly
An employee who is paid a percentage of a sale is paid by ________.
Commission
What is the correct order of the stages of the business life cycle.
1. Existence
2. Survival of the Fittest
3. Success
4. Take-off
5. Maturity
Match each Element of the Design Thinking Process to its corresponding
description. (in order)
Small Business v.2 - U.S. Practice Exam 1
Training)Questions And Answers.
What is Entrepreneurship?
Entrepreneurship is setting up a business with the aim to make a profit.
You've been asked to classify several businesses as either B2B or B2C.
For each business, select B2B or B2C.
"B2B" is an acronym for "business to business," while "B2C" means "business to
consumer." B2B businesses sell products and services directly to other businesses;
whereas B2C businesses sell products and services directly to customers for personal
use. B2B sales usually require a sales tax exemption certificate from the buyer.
B2B:
-Wholesale flooring distributor (because the transition implies the materials purchased
will be resold through a retail business, such as an installer, or a store open to the
general public)
-Purchases requiring a tax exemption certificate (because the transaction states the
buyer is reselling the goods and that is why the purchase is tax exempt)
B2C:
-Chain of local grocery stores (because purchases at the store are typically made by
buyers for personal use. The number of grocery stores managed by the owner is
irrelevant)
-Motorcycle repair shop (because the service provided is typically for personal use)
You need to create a legal structure for your small business. You would like some
of the benefits enjoyed by large corporations, but do not want to be taxed twice.
You have four partners who will be shareholders. None of you plan to sell your
own shares to the public, but do want to be protected from business liabilities.
Which legal structure should you set up for your business?
S-Corporation
Explain S-Corporation, C-Corporation, Sole Proprietorship, & Limited Liability
Company (LLC)
S-Corporation:
-Offers many of the same benefits as a C Corporation, but better for smaller businesses
-100 shareholders maximum allowed. All must be U.S. citizens or residents
-Shareholders are not personally responsible for business liabilities
-Taxed once--only the shareholders pay on profits received. A separate tax return is
required for the business
C-Corporation:
-Best if the company plans to sell stock to the public someday; can issue shares to
founders, employees, and investors
-Unlimited owners (shareholders) allowed
- Shareholders are not personally responsible for business liabilities
-Taxed twice--business pays at the corporate level, and shareholders pay on income
received. A separate tax return is required for the business.
, Sole Proprietorship:
-Best if you need an easy set-up. You may still need a DBA or business license to
operate legally, but no other paperwork is
-One owner maximum
-The owner is personally responsible for business liabilities. No personal liability
protection
-Taxed once--you pay on profits in your personal tax return. Separate tax returns are
not needed
Limited Liability Company (LLC):
-Popular choice for businesses concerned about liability protection
-Unlimited owners (members) allowed. No shareholders. LLCs cannot go public
-Members are not personally responsible for business liabilities
-An LLC can choose how to be taxed by filing form 8832 with the IRS. An LLC can elect
to be taxed as a Sole Proprietorship, Partnership, S Corp, or C Corp. An LLC is not
recognized globally; you may be taxed as a corporation in other countries
For each statement about owners of equity in a business, select True or False.
True:
-A partner owns equity
-Founders own equity
False:
-All stakeholders own equity
-Contractors own equity
By default, owners of equity in a business are founders, partners, and shareholders.
Although it is possible that employees, contractors, and other stakeholders might
purchase equity or be awarded equity in a business, it is not the default.
Complete the sentence about company roles and responsibilities by selecting the
correct option from each drop-down list.
An example of ________ compensation is paying field laborers for the amount of
fruit they pick.
Piece Work
A ________ employee receives a set amount of pay each month without overtime
compensation for extra hours worked.
Salary
Employees most affected by minimum wage laws are compensated ________.
Hourly
An employee who is paid a percentage of a sale is paid by ________.
Commission
What is the correct order of the stages of the business life cycle.
1. Existence
2. Survival of the Fittest
3. Success
4. Take-off
5. Maturity
Match each Element of the Design Thinking Process to its corresponding
description. (in order)
