TN BUSINESS AND LAW EXAM QUESTIONS WITH CORRECT ANSWERS LATEST UPDATE 2026
Rewards for owning your own business include: - Answers -being your own boss
-having flexibility of time
-having more freedom and independence
-making your own decisions
-receiving personal satisfaction from completing a job
The benefits of a business plan - Answers Preparing a business plan that outlines strategies and
goals for your business is useful for a newly formed or early stage business
A business plan serves three key functions: - Answers -planning tool
-loan or investor document
-bench marking tool
Elements of a business plan - Answers -cover page
-executive summary
-company summary
-products and services
-market analysis
-marketing strategy
-financial plan
Business plan pitfalls - Answers -make sure your assumptions are realistic
-keep the language simple, don't use technical terminology of jargon
-cover the risks as well as the opportunities
-analyze your competition thoroughly
Choosing your business structure - Answers when starting business, one of the first things you
need to decide is the legal structure your business will take
What is existence (sole proprietor) - Answers a sole proprietorship is terminated upon the
owner's death
,What is financial management (sole proprietorship) - Answers business and personal expenses
must be separated
What is liability (sole proprietorship) - Answers you bear personal liability for all actions
undertaken in the name of the business
What are taxes (sole proprietorship) - Answers your net income from the business is reported as
ordinary income
What are advantages of a Sole Proprietorship? - Answers -minimal legal restrictions
-simple ownership form
-low start up costs
-sole ownership of profits
-freedom in decision-making process
What is a Partnership? - Answers a relationship between two or more persons who join to carry
on a trade or business
What is existence (partnership) - Answers a general partnership can be formed through an oral
agreement
What is financial management (partnership) - Answers the partnership should keep separate
bank accounts and financial records for the business
What is liability (partnership) - Answers all owners in a general partnership have personal and
unlimited liability for all actions undertaken in the name of the business
What are taxes (partnership) - Answers business, income, and sales taxes are the responsibility
of every partner
Advantages of a general partnership - Answers -ease of formation
-direct profit rewards
-larger management base than that of a sole proprietorship
Disadvantages of a general partnership - Answers -unlimited personal liability of general
partners
-multiple decision makers
-limited life of the business
-changes of partners or partnership agreement may be difficult
, -partnership dissolves in the event of a general partner's death
Potential partners should ask these questions before going into business together: - Answers -
do the partners want to grow and operate a company long-term?
-do the partners want to grow a short-term company to sell?
-how will profits be distributed: 100 percent to partners or part to the business and the rest to
the partners? What are profit distribution percentages?
-do the partners agree on the nature of the business, including the types of jobs the business
will accept?
What is existence (c corporations) - Answers incorporation gives your business a legal existence
What is financial management (c corporations) - Answers the corporation needs separate bank
accounts and separate business records
What is liability (c corporations) - Answers the owners of the corporation, know as stockholders
What are taxes (c corporations) - Answers the corporation must file income tax returns and pay
taxes on the profits
Advantages of a c corporation - Answers -separate legal entity
-limited liability for stockholders
-unlimited life of the business
-availability of capital resources
-transfer of ownership through sale of stock
S corporations - Answers if your business is an eligible domestic corporation, you can avoid
double federal taxation... the S corporation passes its items through income, loss, deduction,
and credits through its shareholders to be included on their separate returns
Sole Proprietorship Taxation - Answers entity not taxed, profits and losses claimed on personal
taxes
S Corporation Taxation - Answers entity generally not taxed, as profits and losses are passed
through to the shareholders (pass-through taxation)
Joint venture - Answers a special business arrangement that exists when two or more
companies join to undertake a specific project
Naming your business - Answers the name you choose affects your customers' impression of
your company. The individuality of the name affects future trademarks and service marks
Rewards for owning your own business include: - Answers -being your own boss
-having flexibility of time
-having more freedom and independence
-making your own decisions
-receiving personal satisfaction from completing a job
The benefits of a business plan - Answers Preparing a business plan that outlines strategies and
goals for your business is useful for a newly formed or early stage business
A business plan serves three key functions: - Answers -planning tool
-loan or investor document
-bench marking tool
Elements of a business plan - Answers -cover page
-executive summary
-company summary
-products and services
-market analysis
-marketing strategy
-financial plan
Business plan pitfalls - Answers -make sure your assumptions are realistic
-keep the language simple, don't use technical terminology of jargon
-cover the risks as well as the opportunities
-analyze your competition thoroughly
Choosing your business structure - Answers when starting business, one of the first things you
need to decide is the legal structure your business will take
What is existence (sole proprietor) - Answers a sole proprietorship is terminated upon the
owner's death
,What is financial management (sole proprietorship) - Answers business and personal expenses
must be separated
What is liability (sole proprietorship) - Answers you bear personal liability for all actions
undertaken in the name of the business
What are taxes (sole proprietorship) - Answers your net income from the business is reported as
ordinary income
What are advantages of a Sole Proprietorship? - Answers -minimal legal restrictions
-simple ownership form
-low start up costs
-sole ownership of profits
-freedom in decision-making process
What is a Partnership? - Answers a relationship between two or more persons who join to carry
on a trade or business
What is existence (partnership) - Answers a general partnership can be formed through an oral
agreement
What is financial management (partnership) - Answers the partnership should keep separate
bank accounts and financial records for the business
What is liability (partnership) - Answers all owners in a general partnership have personal and
unlimited liability for all actions undertaken in the name of the business
What are taxes (partnership) - Answers business, income, and sales taxes are the responsibility
of every partner
Advantages of a general partnership - Answers -ease of formation
-direct profit rewards
-larger management base than that of a sole proprietorship
Disadvantages of a general partnership - Answers -unlimited personal liability of general
partners
-multiple decision makers
-limited life of the business
-changes of partners or partnership agreement may be difficult
, -partnership dissolves in the event of a general partner's death
Potential partners should ask these questions before going into business together: - Answers -
do the partners want to grow and operate a company long-term?
-do the partners want to grow a short-term company to sell?
-how will profits be distributed: 100 percent to partners or part to the business and the rest to
the partners? What are profit distribution percentages?
-do the partners agree on the nature of the business, including the types of jobs the business
will accept?
What is existence (c corporations) - Answers incorporation gives your business a legal existence
What is financial management (c corporations) - Answers the corporation needs separate bank
accounts and separate business records
What is liability (c corporations) - Answers the owners of the corporation, know as stockholders
What are taxes (c corporations) - Answers the corporation must file income tax returns and pay
taxes on the profits
Advantages of a c corporation - Answers -separate legal entity
-limited liability for stockholders
-unlimited life of the business
-availability of capital resources
-transfer of ownership through sale of stock
S corporations - Answers if your business is an eligible domestic corporation, you can avoid
double federal taxation... the S corporation passes its items through income, loss, deduction,
and credits through its shareholders to be included on their separate returns
Sole Proprietorship Taxation - Answers entity not taxed, profits and losses claimed on personal
taxes
S Corporation Taxation - Answers entity generally not taxed, as profits and losses are passed
through to the shareholders (pass-through taxation)
Joint venture - Answers a special business arrangement that exists when two or more
companies join to undertake a specific project
Naming your business - Answers the name you choose affects your customers' impression of
your company. The individuality of the name affects future trademarks and service marks
