Sample questions
Sample questions with answers.
From the practice pool, with the answers shown. The exam asks its own set of 40.
Corporations
1. A founder wants to know the headline difference between a C-Corp and an S-Corp. What's the simplest correct answer this course gives?
- A C-Corp is double-taxed; an S-Corp's income passes straight to shareholders Correct answer
- An S-Corp structure is reserved only for non-profit and charitable organizations
- There's no real difference between them — the two names are just interchangeable
- A C-Corp can have only one owner, while an S-Corp allows unlimited owners
Why: The course's headline distinction is double taxation — corporate level, then again on dividends (C-Corp) — versus pass-through taxation straight to shareholders (S-Corp).
Holding Company Architecture
2. What's the main protective reason this course gives for putting operating businesses into separate subsidiaries under one holding parent, rather than running everything through a single company?
- It compartmentalizes risk, so a claim against one subsidiary stays there Correct answer
- It removes the need for the business to carry any insurance
- It automatically doubles the company's total revenue and profit
- It's a legal requirement once a company has more than one employee
Why: Separate subsidiaries compartmentalize risk so a problem in one doesn't automatically expose the others or the parent's other assets.
Jurisdictions
3. A client asks what CRS and FATCA actually do. What's the accurate summary from this course?
- They legally ban citizens from opening any account at a foreign bank
- They're cross-border regimes where banks report account data to tax authorities Correct answer
- They set a standard minimum corporate tax rate that every member country must apply
- They apply only to transactions on cryptocurrency exchanges
Why: CRS and FATCA are cross-border information-exchange regimes that require financial institutions to report account-holder data, not tax-rate rules or account bans.
Corporations
4. What is a common risk of holding excessively large retained earnings?
- Higher customer churn
- Automatic dividend payments
- Mandatory liquidation
- Regulatory and tax authority attention Correct answer
Corporations
5. What is a main advantage highlighted for founders who choose a private C Corporation?
- Privacy and control over the company Correct answer
- Automatic public listing
- Guaranteed profits
- No need for investors
Basic Structures
6. What is the main purpose of a legal structure in a group project?
- To guarantee the project will succeed
- To replace teamwork with competition
- To remove the need for any rules
- To create a framework for decisions, ownership, and responsibility Correct answer
Sole Proprietorship, LLC & LP
7. What is the primary purpose of using a holding LLC above an operating LLC?
- To avoid any possibility of being sued
- To eliminate the need for insurance
- To merge all assets and risks into one entity
- To isolate valuable assets from business liabilities Correct answer
Sole Proprietorship, LLC & LP
8. This business approach (Sole Proprietorship) is the simplest and also the most ____ form.
- complex
- scalable
- fragile Correct answer
- regulated