OpenStax Entrepreneurship Test Bank
Chapter 13: Business Structure Options: Legal, Tax, and Risk Issues
Chapter 13: Business Structure Options: Legal, Tax, and Risk Issues
* = Correct answer
Multiple Choice/Fill in the Blank
1. Small businesses are defined as organizations with fewer than ________ workers.
A. 50
B. 100
C. 500*
D. 1,000
Difficulty: Easy
2. Your company has 85 shareholders, and the owners account for taxes on the business income
on their personal income tax returns. The owners also have the privilege of limited liability.
What type of business structure best describes your company?
A. C corporation
B. not-for-profit corporation
C. S corporation*
D. LLC
Difficulty: Moderate
3. You source some of your raw materials from a supplier located in the UK. Which category of
risk should you be most concerned about?
A. economic risks*
B. global risks
C. natural disaster risks
D. shipping risks
Difficulty: Easy
4. What is the first step in any entrepreneurial venture?
A. Compete in a pitch competition to try out the idea.
B. Establish the nature and purpose of the business.*
C. Find the business name and get it trademarked.
D. Get grants or find investors to fund the business.
Difficulty: Easy
5. Procter & Gamble is an example of a(n) ________.
A. privately held corporation
B. public corporation
C. publicly held corporation*
Page 1 of 11
, OpenStax Entrepreneurship Test Bank
Chapter 13: Business Structure Options: Legal, Tax, and Risk Issues
D. S corporation
Difficulty: Easy
6. Which of the following is also referred to as business structure from a legal perspective?
A. corporate identity
B. entity selection*
C. legal definition
D. tax status
Difficulty: Easy
7. Why is the initial decision about the entity selection so important?
A. The selection impacts how many employees you can have at one time.
B. The business structure is set and cannot be changed later.
C. The government mandates that certain businesses have certain structures.
D. The business may have the potential to evolve into a much larger business.*
Difficulty: Moderate
8. Which of the following is best if you want to manage the business yourself and protect your
personal assets?
A. joint venture
B. partnership
C. single-member LLC*
D. sole proprietor
Difficulty: Moderate
9. Which of the following is the reason the entrepreneur forms the company and determines
who benefits from it?
A. business purpose*
B. business structure
C. entity selection
D. legal definition
Difficulty: Easy
10. The first consideration for entity selection is ________.
A. how many lenders the business will have
B. how many employees the business will have
C. where the business will be located
D. if the business will be for-profit or not-for-profit*
Difficulty: Moderate
Page 2 of 11
Chapter 13: Business Structure Options: Legal, Tax, and Risk Issues
Chapter 13: Business Structure Options: Legal, Tax, and Risk Issues
* = Correct answer
Multiple Choice/Fill in the Blank
1. Small businesses are defined as organizations with fewer than ________ workers.
A. 50
B. 100
C. 500*
D. 1,000
Difficulty: Easy
2. Your company has 85 shareholders, and the owners account for taxes on the business income
on their personal income tax returns. The owners also have the privilege of limited liability.
What type of business structure best describes your company?
A. C corporation
B. not-for-profit corporation
C. S corporation*
D. LLC
Difficulty: Moderate
3. You source some of your raw materials from a supplier located in the UK. Which category of
risk should you be most concerned about?
A. economic risks*
B. global risks
C. natural disaster risks
D. shipping risks
Difficulty: Easy
4. What is the first step in any entrepreneurial venture?
A. Compete in a pitch competition to try out the idea.
B. Establish the nature and purpose of the business.*
C. Find the business name and get it trademarked.
D. Get grants or find investors to fund the business.
Difficulty: Easy
5. Procter & Gamble is an example of a(n) ________.
A. privately held corporation
B. public corporation
C. publicly held corporation*
Page 1 of 11
, OpenStax Entrepreneurship Test Bank
Chapter 13: Business Structure Options: Legal, Tax, and Risk Issues
D. S corporation
Difficulty: Easy
6. Which of the following is also referred to as business structure from a legal perspective?
A. corporate identity
B. entity selection*
C. legal definition
D. tax status
Difficulty: Easy
7. Why is the initial decision about the entity selection so important?
A. The selection impacts how many employees you can have at one time.
B. The business structure is set and cannot be changed later.
C. The government mandates that certain businesses have certain structures.
D. The business may have the potential to evolve into a much larger business.*
Difficulty: Moderate
8. Which of the following is best if you want to manage the business yourself and protect your
personal assets?
A. joint venture
B. partnership
C. single-member LLC*
D. sole proprietor
Difficulty: Moderate
9. Which of the following is the reason the entrepreneur forms the company and determines
who benefits from it?
A. business purpose*
B. business structure
C. entity selection
D. legal definition
Difficulty: Easy
10. The first consideration for entity selection is ________.
A. how many lenders the business will have
B. how many employees the business will have
C. where the business will be located
D. if the business will be for-profit or not-for-profit*
Difficulty: Moderate
Page 2 of 11
