Entrepreneurship Legal and Business Structure 1

Question 1

What is a sole proprietorship?

Accepted Answer

A business owned and operated by a single individual with no legal distinction between owner and business

Answer

A sole proprietorship is the simplest business structure, where the owner and the business are legally the same entity, making the owner personally liable for all debts.

Question 2

What is the main advantage of forming an LLC (Limited Liability Company)?

Accepted Answer

Personal liability protection for the owner's assets separate from business debts

Answer

An LLC protects the owner's personal assets from business liabilities, while offering flexible tax treatment and simpler governance than a corporation.

Question 3

What is an S corporation?

Accepted Answer

A pass-through tax entity that avoids double taxation while providing liability protection

Answer

An S corporation passes corporate income, losses, and deductions through to shareholders' personal tax returns, avoiding the double taxation of a C corporation.

Question 4

What is a partnership agreement?

Accepted Answer

A legal document outlining the rights, responsibilities, and profit sharing of business partners

Answer

A partnership agreement is a legal contract that defines each partner's contributions, ownership percentage, decision-making authority, and procedures for dispute resolution.

Question 5

What is a trademark?

Accepted Answer

A symbol, name, or phrase legally registered to distinguish a company's goods or services

Answer

A trademark legally protects brand identifiers—logos, names, slogans—giving the owner exclusive rights to use them in commerce and preventing consumer confusion.

Entrepreneurship Practice Test

Entrepreneurship Practice Test

Entrepreneurship Legal and Business Structure 1