ESB - Certified Entrepreneurship and Small Business Specialist Legal Structures and Ethics Questions and Answers

Question 1

An entrepreneur is starting a new delivery service and is concerned about protecting their personal assets from business debts and lawsuits.
They anticipate being the sole owner and want a structure that is simple to create and manage.
Which legal structure best meets these needs?

Accepted Answer

Limited Liability Company (LLC)

Answer

Sole Proprietorship

Answer

General Partnership

Answer

C Corporation

Question 2

Which of the following best describes the primary purpose of a company's code of conduct?

Accepted Answer

To set clear expectations for ethical behavior and guide decision-making for all employees.

Answer

To maximize shareholder profits and outline financial goals.

Answer

To serve as a marketing tool for attracting new customers.

Answer

To detail the specific job responsibilities for every position within the company.

Question 3

A small business owner hires their cousin to supply all the raw materials for their manufacturing business, even though another supplier offered a lower price for better quality materials. This situation is a clear example of what ethical issue?

Accepted Answer

Conflict of Interest

Answer

Corporate Social Responsibility

Answer

Intellectual Property Infringement

Answer

A Whistleblower Event

Question 4

A graphic designer creates a unique logo for their new consulting firm. To prevent competitors from using a confusingly similar logo, which form of intellectual property protection should they seek?

Accepted Answer

Trademark

Answer

Patent

Answer

Copyright

Answer

Trade Secret

Question 5

An entrepreneur is deciding between an S Corporation and a C Corporation. Their primary goal is to attract a large number of international investors and offer different classes of stock with varying dividend rights. Which structure should they choose?

Accepted Answer

C Corporation, because it has no restrictions on ownership or stock classes.

Answer

Sole Proprietorship, because it is the simplest.

Answer

S Corporation, because it avoids double taxation.

Answer

Limited Liability Company, because it offers flexibility.

Question 6

A new coffee shop decides to source all of its beans from farms that are certified for paying workers a fair wage and using environmentally friendly farming methods. This business practice is best described as:

Accepted Answer

Ethical Sourcing

Answer

Profit Maximization

Answer

Competitive Analysis

Answer

Market Penetration