Business Plan Legal & Organizational Structure 1

Question 1

What is a sole proprietorship?

Accepted Answer

A business owned and operated by one individual with no legal separation from the owner

Answer

A sole proprietorship is a business owned and operated by one individual, with no legal distinction between the owner and the business entity.

Question 2

What is a Limited Liability Company (LLC)?

Accepted Answer

A hybrid business structure combining corporate liability protection with partnership tax flexibility

Answer

An LLC is a hybrid business structure that provides owners (members) with limited liability protection while offering the tax flexibility of a partnership.

Question 3

What is the difference between a C-Corp and an S-Corp?

Accepted Answer

C-Corps face double taxation and can have unlimited shareholders; S-Corps pass taxes to shareholders and have limits on share structure

Answer

C-Corps are subject to double taxation (corporate and personal) but can have unlimited shareholders and types; S-Corps pass income to shareholders' personal taxes but have restrictions on shareholders.

Question 4

What does 'articles of incorporation' establish?

Accepted Answer

The legal formation of a corporation, including name, purpose, and share structure

Answer

Articles of incorporation are legal documents filed with the state that formally establish a corporation, including its name, purpose, registered agent, and share structure.

Question 5

What is a partnership agreement?

Accepted Answer

A legal document defining the rights, responsibilities, profit sharing, and decision-making of business partners

Answer

A partnership agreement is a legal document that defines the rights, responsibilities, profit-sharing arrangements, and decision-making processes between business partners.

Business Plan Practice Test

Business Plan Practice Test

Business Plan Legal & Organizational Structure 1