Entrepreneurship Certification Study
Guide with Correct/Verified Answers.
Small Business Owners - Answer -not always interested in taking on new business
opportunities
-their key objective is to generate profits
-content to stick with that their current business does
The U.S. Small Business Administration (SBA) counts companies with as much as $35.5 million in
sales and 1,500 employees as "small businesses," depending on the industry
Entrepreneurs - Answer -interested in taking on new business opportunities
-an individual with an innovative product or service
-formulates and grows a business from that idea
-willing to explore new opportunities and unknown risks
-grow their business and achieve profits rapidly
Franchise - Answer -the owner's license their operations, products or services, branding, and
knowledge for a franchise fee (or royalty fee)
-this arrangement requires that a previously agreed-upon amount in sales revenue be paid to
the franchise owner
-higher upfront costs but are less risky as you're also purchasing tested and true operational
processes, products and services, and well-recognized branding
-continued direction, guidance, and training provided by the franchise owners
-offer ongoing support and training (Business Opp. Section in LKey)
-buyers agree to buy and sell the products developed by the seller or the owner of the license
-strict stipulation on where a franchise location can be opened
Physical Products - Answer -usually perceived to be of higher value (people are willing to pay
for them because you can see and touch the product)
,-need to be stored and tracked
-shipping and packaging (account for additional costs)
Services - Answer Intangible things like a skill or expertise that is performed (requires some
training to perform)
E-commerce - Answer selling items over the internet (it can be physical products or digital
products)
Digital goods & services (or Digital product) - Answer Considered intangible (services) i.e.,
Dropbox, grammarly, electronic cards, e-books
-No need for physical storage locations, inventory, additional employees, or shipping costs
-Instant delivery at little or no additional cost
-More difficult to demonstrate the value of the product or service (cannot see or touch the
product)
Business-to-Consumer (B2C) Transaction - Answer A customer purchases an item from a
business
Business-to-Business (B2B) Transaction - Answer When a business purchases a product,
service, or information from another business, it is a business-to-business (B2B) transaction.
B2B transactions commonly take place when one business supplies materials to another
business to produce its products
Purchases requiring tax exmpetion certificate are. . . (B2B or B2C)? - Answer They are B2B
because the transaction states the buyer is reselling the goods and that's why the purchase is
tax exempt.
In other words, sale taxes are only charged when an item is sold to the end-user, or consumer.
Different Business Entity Selection - Answer S Corporation, C Corporation, Limited Liability
Company (LLC), Sole Proprietorship & Non-Profit Corporation
,S Corporation - Answer -is provided with a special tax advantage that allows the company to
pass its income, losses, deductions, and credits through its shareholders; doing this results in
low taxation
-besides this special taxation, a S Corporation is a for-profit corporation and offers similar
liability protections as a C Corporation; (limited liability protection shields the owners ' personal
assets from business creditors)
-Disadvantage: very strict qualification requirements must be met to become an S Corporation;
(no more than 100 shareholders; one one class of stock aka all stakeholders have voting rights
or don't- can't be split, strict stipulations on who is allowed to be a shareholder aka you must be
a U.S. citizen or resident)
C Corporation - Answer -Taxes the corporation separate from its owners (double taxation-
company's profits and shareholder's dividends)
-Ideal for international business
-International business owners do not have to file a U.S. personal income tax return since their
profits and losses do not flow through them (like an S. Corp. or an LLC)
-Just like an S Corporation, a C Corporation is provided with limited liability protection
Limited Liability Company (LLC) - Answer -Offers the same limited liability as a corporation
but costs less to create
-LLCs are provided with pass-through taxation, similar to an S Corporation
-It allows the owners to pay taxes on their profits or losses through their own taxes using a
personal tax rate
-This structure is ideal for a single owner desiring low risk because owners are not personally
liable for any of the company's debts
-Unlimited owner's (aka "members") allowed. Owners of LLCs are not called shareholders. LLCs
cannot go public
-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, (Schedule C) Partnership, (Form 1065) S Corp., (Form 1120-S) or
C Corp. (Form 1120)
, -An LLC is not recognized globally; you may be taxed as a corporation in other countries
Sole Proprietorship - Answer -Easy to create due to the lack of government regulation
-There is no line between the business and the owner
-The owner is responsible for all the business's debt, whereas a partnership shares the
responsibility for financial backing between partners (and they have unlimited personal liability)
Non-Profit Entity - Answer -No one owns a non-profit entity
-It is given a tax-exempt status which does not require the entity to pay any U.S. federal taxes
Chief Executive Officer (CEO) - Answer -Highest ranked employee in the company
-Responsible for the business's success
-Makes the major decisions for the company
-Oversees operations and resources
-Develops the company's vision, strategies, and mission
-Reports to a board of directors (see packet pg 4 for more info)
-If there is no board of directors (because the company is private or small) then the CEO reports
directly to the owners/shareholders
Chief Financial Officer (CFO) - Answer -In charge of the company's finances
-Manages and plans cash flow
-Creates Budgets
Guide with Correct/Verified Answers.
Small Business Owners - Answer -not always interested in taking on new business
opportunities
-their key objective is to generate profits
-content to stick with that their current business does
The U.S. Small Business Administration (SBA) counts companies with as much as $35.5 million in
sales and 1,500 employees as "small businesses," depending on the industry
Entrepreneurs - Answer -interested in taking on new business opportunities
-an individual with an innovative product or service
-formulates and grows a business from that idea
-willing to explore new opportunities and unknown risks
-grow their business and achieve profits rapidly
Franchise - Answer -the owner's license their operations, products or services, branding, and
knowledge for a franchise fee (or royalty fee)
-this arrangement requires that a previously agreed-upon amount in sales revenue be paid to
the franchise owner
-higher upfront costs but are less risky as you're also purchasing tested and true operational
processes, products and services, and well-recognized branding
-continued direction, guidance, and training provided by the franchise owners
-offer ongoing support and training (Business Opp. Section in LKey)
-buyers agree to buy and sell the products developed by the seller or the owner of the license
-strict stipulation on where a franchise location can be opened
Physical Products - Answer -usually perceived to be of higher value (people are willing to pay
for them because you can see and touch the product)
,-need to be stored and tracked
-shipping and packaging (account for additional costs)
Services - Answer Intangible things like a skill or expertise that is performed (requires some
training to perform)
E-commerce - Answer selling items over the internet (it can be physical products or digital
products)
Digital goods & services (or Digital product) - Answer Considered intangible (services) i.e.,
Dropbox, grammarly, electronic cards, e-books
-No need for physical storage locations, inventory, additional employees, or shipping costs
-Instant delivery at little or no additional cost
-More difficult to demonstrate the value of the product or service (cannot see or touch the
product)
Business-to-Consumer (B2C) Transaction - Answer A customer purchases an item from a
business
Business-to-Business (B2B) Transaction - Answer When a business purchases a product,
service, or information from another business, it is a business-to-business (B2B) transaction.
B2B transactions commonly take place when one business supplies materials to another
business to produce its products
Purchases requiring tax exmpetion certificate are. . . (B2B or B2C)? - Answer They are B2B
because the transaction states the buyer is reselling the goods and that's why the purchase is
tax exempt.
In other words, sale taxes are only charged when an item is sold to the end-user, or consumer.
Different Business Entity Selection - Answer S Corporation, C Corporation, Limited Liability
Company (LLC), Sole Proprietorship & Non-Profit Corporation
,S Corporation - Answer -is provided with a special tax advantage that allows the company to
pass its income, losses, deductions, and credits through its shareholders; doing this results in
low taxation
-besides this special taxation, a S Corporation is a for-profit corporation and offers similar
liability protections as a C Corporation; (limited liability protection shields the owners ' personal
assets from business creditors)
-Disadvantage: very strict qualification requirements must be met to become an S Corporation;
(no more than 100 shareholders; one one class of stock aka all stakeholders have voting rights
or don't- can't be split, strict stipulations on who is allowed to be a shareholder aka you must be
a U.S. citizen or resident)
C Corporation - Answer -Taxes the corporation separate from its owners (double taxation-
company's profits and shareholder's dividends)
-Ideal for international business
-International business owners do not have to file a U.S. personal income tax return since their
profits and losses do not flow through them (like an S. Corp. or an LLC)
-Just like an S Corporation, a C Corporation is provided with limited liability protection
Limited Liability Company (LLC) - Answer -Offers the same limited liability as a corporation
but costs less to create
-LLCs are provided with pass-through taxation, similar to an S Corporation
-It allows the owners to pay taxes on their profits or losses through their own taxes using a
personal tax rate
-This structure is ideal for a single owner desiring low risk because owners are not personally
liable for any of the company's debts
-Unlimited owner's (aka "members") allowed. Owners of LLCs are not called shareholders. LLCs
cannot go public
-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, (Schedule C) Partnership, (Form 1065) S Corp., (Form 1120-S) or
C Corp. (Form 1120)
, -An LLC is not recognized globally; you may be taxed as a corporation in other countries
Sole Proprietorship - Answer -Easy to create due to the lack of government regulation
-There is no line between the business and the owner
-The owner is responsible for all the business's debt, whereas a partnership shares the
responsibility for financial backing between partners (and they have unlimited personal liability)
Non-Profit Entity - Answer -No one owns a non-profit entity
-It is given a tax-exempt status which does not require the entity to pay any U.S. federal taxes
Chief Executive Officer (CEO) - Answer -Highest ranked employee in the company
-Responsible for the business's success
-Makes the major decisions for the company
-Oversees operations and resources
-Develops the company's vision, strategies, and mission
-Reports to a board of directors (see packet pg 4 for more info)
-If there is no board of directors (because the company is private or small) then the CEO reports
directly to the owners/shareholders
Chief Financial Officer (CFO) - Answer -In charge of the company's finances
-Manages and plans cash flow
-Creates Budgets
