TN BUSINESS AND LAW EXAM 190 STUDY
GUIDE 2026 TESTED QUESTIONS AND
PRACTICE SOLUTION GRADED A+
◉ Sole Proprietorship.
Answer: 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.
Answer: minimal legal restrictions, simple ownership form, low
startup cost, sole owner of profits, freedom in decision making
◉ Disadvantages to a Sole Proprietorship.
Answer: unlimited liability, less available capital, possible difficulty
in obtaining long term financing, dissolution of the business in even
of owner death
◉ Partnership.
Answer: 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.
Answer: general and limited
◉ Advantages of a General Partnership.
Answer: ease of formation, direct profit rewards, larger management
base than that of a sole proprietorship
◉ Disadvantages to a General Partnership.
Answer: unlimited liability, potential for disagreements, lack of
continuity, difficulty in withdrawing from a partnership
◉ C Corporation.
Answer: a legal business entity that has independent ownership of
assets and liabilities from its shareholders
◉ Requirements of C Corporation.
Answer: 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.
,Answer: separate legal entity, limited liability for stockholders,
unlimited life of the business, availability of capital resources,
transfer of ownership though stock
◉ Disadvantages to a C Corporation.
Answer: complex and expensive organization, limitations on
corporations activities and decisions by the corporate charter,
extensive record keeping and regulation, double taxation
◉ S Corporation.
Answer: 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.
Answer: 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).
Answer: 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.
Answer: 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.
Answer: generally formed on a project basis in order to integrate
positive attributes and resources of to or more companies
◉ Purpose of Licensing.
Answer: protects the health, safety, and welfare of the public
◉ Tennessee Board of Licensing Contractors.
Answer: regulates contracting activities through examination,
licensure, and disciplinary
◉ TN Contractor License Requirements.
Answer: must have contractor license for construction projects of
$25,000 or more
GUIDE 2026 TESTED QUESTIONS AND
PRACTICE SOLUTION GRADED A+
◉ Sole Proprietorship.
Answer: 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.
Answer: minimal legal restrictions, simple ownership form, low
startup cost, sole owner of profits, freedom in decision making
◉ Disadvantages to a Sole Proprietorship.
Answer: unlimited liability, less available capital, possible difficulty
in obtaining long term financing, dissolution of the business in even
of owner death
◉ Partnership.
Answer: 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.
Answer: general and limited
◉ Advantages of a General Partnership.
Answer: ease of formation, direct profit rewards, larger management
base than that of a sole proprietorship
◉ Disadvantages to a General Partnership.
Answer: unlimited liability, potential for disagreements, lack of
continuity, difficulty in withdrawing from a partnership
◉ C Corporation.
Answer: a legal business entity that has independent ownership of
assets and liabilities from its shareholders
◉ Requirements of C Corporation.
Answer: 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.
,Answer: separate legal entity, limited liability for stockholders,
unlimited life of the business, availability of capital resources,
transfer of ownership though stock
◉ Disadvantages to a C Corporation.
Answer: complex and expensive organization, limitations on
corporations activities and decisions by the corporate charter,
extensive record keeping and regulation, double taxation
◉ S Corporation.
Answer: 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.
Answer: 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).
Answer: 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.
Answer: 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.
Answer: generally formed on a project basis in order to integrate
positive attributes and resources of to or more companies
◉ Purpose of Licensing.
Answer: protects the health, safety, and welfare of the public
◉ Tennessee Board of Licensing Contractors.
Answer: regulates contracting activities through examination,
licensure, and disciplinary
◉ TN Contractor License Requirements.
Answer: must have contractor license for construction projects of
$25,000 or more
