TN BUSINESS AND LAW EXAM 2025
WITH CORRECT ANSWERS_GRADED
A+
Rewards for owning your own business include: - correct answers -being your own boss
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-having flexibility of time
l l l
-having more freedom and independence
l l l l
-making your own decisions l l l
-receiving personal satisfaction from completing a job
l l l l l l
The benefits of a business plan - correct answers Preparing a business plan that outlines strategies and goals for
l l l l l l l l l l l l l l l l l l l l
your business is useful for a newly formed or early stage business
l l l l l l l l l l l
l A business plan serves three key functions: - correct answers -planning tool
l l l l l l l l l l l
-loan or investor document
l l l
-bench marking tool l l
l Elements of a business plan - correct answers -cover page
l l l l l l l l l
-executive summary l
,-company summary l
-products and services l l
-market analysis l
-marketing strategy l
-financial plan l
l Business plan pitfalls - correct answers -make sure your assumptions are realistic
l l l l l l l l l l l
-keep the language simple, don't use technical terminology of jargon
l l l l l l l l l
-cover the risks as well as the opportunities
l l l l l l l
-analyze your competition thoroughly l l l
Choosing your business structure - correct answers when starting business, one of the first things you need to
l l l l l l l l l l l l l l l l l l l
decide is the legal structure your business will take
l l l l l l l l
What is existence (sole proprietor) - correct answers a sole proprietorship is terminated upon the owner's
l l l l l l l l l l l l l l l l l
death
What is financial management (sole proprietorship) - correct answers business and personal expenses must
l l l l l l l l l l l l l l l
be separated
l
What is liability (sole proprietorship) - correct answers you bear personal liability for all actions undertaken in
l l l l l l l l l l l l l l l l l l
the name of the business
l l l l
What are taxes (sole proprietorship) - correct answers your net income from the business is reported as
l l l l l l l l l l l l l l l l l l
ordinary income l
l What are advantages of a Sole Proprietorship? - correct answers -minimal legal restrictions
l l l l l l l l l l l l
-simple ownership form l l
-low start up costs
l l l
-sole ownership of profits
l l l
,-freedom in decision-making process l l l
What is a Partnership? - correct answers a relationship between two or more persons who join to carry on a
l l l l l l l l l l l l l l l l l l l l l
trade or business
l l
What is existence (partnership) - correct answers a general partnership can be formed through an oral
l l l l l l l l l l l l l l l l l
agreement
What is financial management (partnership) - correct answers the partnership should keep separate bank
l l l l l l l l l l l l l l l
accounts and financial records for the businessl l l l l l
What is liability (partnership) - correct answers all owners in a general partnership have personal and
l l l l l l l l l l l l l l l l l
unlimited liability for all actions undertaken in the name of the business
l l l l l l l l l l l
What are taxes (partnership) - correct answers business, income, and sales taxes are the responsibility of every
l l l l l l l l l l l l l l l l l
l partner
l Advantages of a general partnership - correct answers -ease of formation
l l l l l l l l l l
-direct profit rewards l l
-larger management base than that of a sole proprietorship
l l l l l l l l
l Disadvantages of a general partnership - correct answers -unlimited personal liability of general partners
l l l l l l l l l l l l l
-multiple decision makers l l
-limited life of the business l l l l
-changes of partners or partnership agreement may be difficult
l l l l l l l l
-partnership dissolves in the event of a general partner's death l l l l l l l l l
Potential partners should ask these questions before going into business together: - correct answers -do the
l l l l l l l l l l l l l l l l l
partners want to grow and operate a company long-term?
l l l l l l l l
-do the partners want to grow a short-term company to sell?
l l l l l l l l l l
, -how will profits be distributed: 100 percent to partners or part to the business and the rest to the partners?
l l l l l l l l l l l l l l l l l l l l
What are profit distribution percentages?
l l l l
-do the partners agree on the nature of the business, including the types of jobs the business will accept?
l l l l l l l l l l l l l l l l l l
l What is existence (c corporations) - correct answers incorporation gives your business a legal existence
l l l l l l l l l l l l l l
What is financial management (c corporations) - correct answers the corporation needs separate bank
l l l l l l l l l l l l l l l
accounts and separate business records l l l l
l What is liability (c corporations) - correct answers the owners of the corporation, know as stockholders
l l l l l l l l l l l l l l l
What are taxes (c corporations) - correct answers the corporation must file income tax returns and pay taxes on
l l l l l l l l l l l l l l l l l l l
l the profits l
l Advantages of a c corporation - correct answers -separate legal entity l l l l l l l l l l
-limited liability for stockholders l l l
-unlimited life of the business l l l l
-availability of capital resources l l l
-transfer of ownership through sale of stock l l l l l l
S corporations - correct answers if your business is an eligible domestic corporation, you can avoid double
l l l l l l l l l l l l l l l l l l
federal taxation... the S corporation passes its items through income, loss, deduction, and credits through its
l l l l l l l l l l l l l l l l
shareholders to be included on their separate returns l l l l l l l
l Sole Proprietorship Taxation - correct answers entity not taxed, profits and losses claimed on personal taxes
l l l l l l l l l l l l l l l
S Corporation Taxation - correct answers entity generally not taxed, as profits and losses are passed through to
l l l l l l l l l l l l l l l l l l l
the shareholders (pass-through taxation)
l l l
Joint venture - correct answers a special business arrangement that exists when two or more companies join to
l l l l l l l l l l l l l l l l l l l
undertake a specific project l l l
WITH CORRECT ANSWERS_GRADED
A+
Rewards for owning your own business include: - correct answers -being your own boss
l l l l l l l l l l l l l
-having flexibility of time
l l l
-having more freedom and independence
l l l l
-making your own decisions l l l
-receiving personal satisfaction from completing a job
l l l l l l
The benefits of a business plan - correct answers Preparing a business plan that outlines strategies and goals for
l l l l l l l l l l l l l l l l l l l l
your business is useful for a newly formed or early stage business
l l l l l l l l l l l
l A business plan serves three key functions: - correct answers -planning tool
l l l l l l l l l l l
-loan or investor document
l l l
-bench marking tool l l
l Elements of a business plan - correct answers -cover page
l l l l l l l l l
-executive summary l
,-company summary l
-products and services l l
-market analysis l
-marketing strategy l
-financial plan l
l Business plan pitfalls - correct answers -make sure your assumptions are realistic
l l l l l l l l l l l
-keep the language simple, don't use technical terminology of jargon
l l l l l l l l l
-cover the risks as well as the opportunities
l l l l l l l
-analyze your competition thoroughly l l l
Choosing your business structure - correct answers when starting business, one of the first things you need to
l l l l l l l l l l l l l l l l l l l
decide is the legal structure your business will take
l l l l l l l l
What is existence (sole proprietor) - correct answers a sole proprietorship is terminated upon the owner's
l l l l l l l l l l l l l l l l l
death
What is financial management (sole proprietorship) - correct answers business and personal expenses must
l l l l l l l l l l l l l l l
be separated
l
What is liability (sole proprietorship) - correct answers you bear personal liability for all actions undertaken in
l l l l l l l l l l l l l l l l l l
the name of the business
l l l l
What are taxes (sole proprietorship) - correct answers your net income from the business is reported as
l l l l l l l l l l l l l l l l l l
ordinary income l
l What are advantages of a Sole Proprietorship? - correct answers -minimal legal restrictions
l l l l l l l l l l l l
-simple ownership form l l
-low start up costs
l l l
-sole ownership of profits
l l l
,-freedom in decision-making process l l l
What is a Partnership? - correct answers a relationship between two or more persons who join to carry on a
l l l l l l l l l l l l l l l l l l l l l
trade or business
l l
What is existence (partnership) - correct answers a general partnership can be formed through an oral
l l l l l l l l l l l l l l l l l
agreement
What is financial management (partnership) - correct answers the partnership should keep separate bank
l l l l l l l l l l l l l l l
accounts and financial records for the businessl l l l l l
What is liability (partnership) - correct answers all owners in a general partnership have personal and
l l l l l l l l l l l l l l l l l
unlimited liability for all actions undertaken in the name of the business
l l l l l l l l l l l
What are taxes (partnership) - correct answers business, income, and sales taxes are the responsibility of every
l l l l l l l l l l l l l l l l l
l partner
l Advantages of a general partnership - correct answers -ease of formation
l l l l l l l l l l
-direct profit rewards l l
-larger management base than that of a sole proprietorship
l l l l l l l l
l Disadvantages of a general partnership - correct answers -unlimited personal liability of general partners
l l l l l l l l l l l l l
-multiple decision makers l l
-limited life of the business l l l l
-changes of partners or partnership agreement may be difficult
l l l l l l l l
-partnership dissolves in the event of a general partner's death l l l l l l l l l
Potential partners should ask these questions before going into business together: - correct answers -do the
l l l l l l l l l l l l l l l l l
partners want to grow and operate a company long-term?
l l l l l l l l
-do the partners want to grow a short-term company to sell?
l l l l l l l l l l
, -how will profits be distributed: 100 percent to partners or part to the business and the rest to the partners?
l l l l l l l l l l l l l l l l l l l l
What are profit distribution percentages?
l l l l
-do the partners agree on the nature of the business, including the types of jobs the business will accept?
l l l l l l l l l l l l l l l l l l
l What is existence (c corporations) - correct answers incorporation gives your business a legal existence
l l l l l l l l l l l l l l
What is financial management (c corporations) - correct answers the corporation needs separate bank
l l l l l l l l l l l l l l l
accounts and separate business records l l l l
l What is liability (c corporations) - correct answers the owners of the corporation, know as stockholders
l l l l l l l l l l l l l l l
What are taxes (c corporations) - correct answers the corporation must file income tax returns and pay taxes on
l l l l l l l l l l l l l l l l l l l
l the profits l
l Advantages of a c corporation - correct answers -separate legal entity l l l l l l l l l l
-limited liability for stockholders l l l
-unlimited life of the business l l l l
-availability of capital resources l l l
-transfer of ownership through sale of stock l l l l l l
S corporations - correct answers if your business is an eligible domestic corporation, you can avoid double
l l l l l l l l l l l l l l l l l l
federal taxation... the S corporation passes its items through income, loss, deduction, and credits through its
l l l l l l l l l l l l l l l l
shareholders to be included on their separate returns l l l l l l l
l Sole Proprietorship Taxation - correct answers entity not taxed, profits and losses claimed on personal taxes
l l l l l l l l l l l l l l l
S Corporation Taxation - correct answers entity generally not taxed, as profits and losses are passed through to
l l l l l l l l l l l l l l l l l l l
the shareholders (pass-through taxation)
l l l
Joint venture - correct answers a special business arrangement that exists when two or more companies join to
l l l l l l l l l l l l l l l l l l l
undertake a specific project l l l
