Brightwood - Practice Management
ARE 5.0 Exam Questions and All
Actual Answers 2025-2026 Updated.
Sole Proprietorship - Answer The Business is Owned by an individual. The business may
operate under the Owner's name or under a Company name.
Advantages of Sole Proprietorship - Answer 1. Ease of formation/ setup
2. Retention of control/ total management by the Owner.
3. Possible tax advantage
What are the Tax advantages for the Sole Proprietorship? - Answer When the business
experiences expensive or losses they may be deducted from the gross income of the business.
Disadvantages of Sole Proprietorship - Answer Limited to life of owner
Equity capital limited to owner's personal wealth
Unlimited liability
Difficult to sell ownership interest
Partnership - Answer A business in which two or more persons combine their assets and
skills
Advantages of Partnership - Answer Ease of start-up
Availability of capital and credit
Personal interest
Combined business skills and knowledge
Retention of profits
No special taxes
Disadvantages of Partnership - Answer Unlimited liability
Partnership dissolves when one partner dies or wishes to sell
Difficult to transfer ownership
General partnership agreement - Answer A written agreement that partners sign to form a
general partnership.
,Advantages of General Partnership - Answer ability to pool financial resources, ability to
share responsibilities and capitalize on complementary skills, ease of formation, possible tax
advantages
Limited Partnership (LP) - Answer Similar to a Partnership, but has at least one General
Partner and one Limited Partner.
General Partner invest in the business, manage it, and are financially responsible for it
Advantages of Limited Partnership - Answer 1. General partners have right to participate in
management
2. Limited partners have limited liability for business obligations
3. Choice of taxation, deductible losses and expenses
4. Survives withdrawal of partner (except sole general partner)
C Corporation - Answer The most common type of corporation, which is a legal business
entity that offers limited liability to all of its owners, who are called stockholders
Advantages of C Corporations - Answer -Owners liable only up to the amount of their
investment
-Easier to raise capital
-No restrictions on # of shareholders
-Stock is liquid if traded on major stock exchange
-Stock options for employees
Disadvantages of a corporation - Answer -double taxation
-cost of setup and report filing
S corporation - Answer A unique government creation that looks like a corporation but is
taxed like sole proprietorships and partnerships
Advantages of S Corporation - Answer -Avoids double taxation of a corporation
-Retains the corporation's legal benefit of limited liability
Limited Liability Company (LLC) - Answer A hybrid form of business enterprise that offers the
limited liability of the corporation but the tax advantages of a partnership.
work environment - Answer the physical conditions and the psychological atmosphere in
which employees work
, hiring process - Answer Advertising, Unsolicited Resumes and Word of Mouth
Equal Employment Opportunity
Civil Rights Act of 1984
ADA- American Disabilities Act
Review of past Work
Contract for Employment
Non-Compete Clause
Fair Credit Reporting Act (FCRA) - Answer U.S act that protects privacy of background
information and ensures that information supplied is accurate.
Drug-Free Workplace Act - Answer U.S. law that requires federal contractors with contracts
of $100,000 or more as well as recipients of grants from federal government to certify they are
maintaining a drug-free workplace.
Polygraph Protection Act of 1988 - Answer Prohibits employers in the private sector from
using lie-detector tests in all employment decisions
Immigration Reform and Control Act of 1986 - Answer Act that prohibits discrimination
against job applicants on the basis of national origin or citizenship; establishes penalties for
hiring illegal aliens and requires employers to establish each employee's identity and eligibility
to work.
Fair Labor Standards Act (FLSA) - Answer U.S act that establishes minimum wage, overtime
pay, youth employment, and record-keeping standards affecting full-time and part-time workers
in the private sector and in federal, state, and local governments.
Employee Retirement Income Security Act (ERISA) - Answer Act that established uniform
minimum standards for employer-sponsored retirement and health and welfare benefit
programs.
Health Insurance Portability and Privacy Act - Answer Specifics the privacy of employees
health data.
Family and Medical Leave Act (FMLA) - Answer U.S act that provides employees with up to
12 weeks of unpaid leave to care for family members or because of a serious health condition of
the employee.
ARE 5.0 Exam Questions and All
Actual Answers 2025-2026 Updated.
Sole Proprietorship - Answer The Business is Owned by an individual. The business may
operate under the Owner's name or under a Company name.
Advantages of Sole Proprietorship - Answer 1. Ease of formation/ setup
2. Retention of control/ total management by the Owner.
3. Possible tax advantage
What are the Tax advantages for the Sole Proprietorship? - Answer When the business
experiences expensive or losses they may be deducted from the gross income of the business.
Disadvantages of Sole Proprietorship - Answer Limited to life of owner
Equity capital limited to owner's personal wealth
Unlimited liability
Difficult to sell ownership interest
Partnership - Answer A business in which two or more persons combine their assets and
skills
Advantages of Partnership - Answer Ease of start-up
Availability of capital and credit
Personal interest
Combined business skills and knowledge
Retention of profits
No special taxes
Disadvantages of Partnership - Answer Unlimited liability
Partnership dissolves when one partner dies or wishes to sell
Difficult to transfer ownership
General partnership agreement - Answer A written agreement that partners sign to form a
general partnership.
,Advantages of General Partnership - Answer ability to pool financial resources, ability to
share responsibilities and capitalize on complementary skills, ease of formation, possible tax
advantages
Limited Partnership (LP) - Answer Similar to a Partnership, but has at least one General
Partner and one Limited Partner.
General Partner invest in the business, manage it, and are financially responsible for it
Advantages of Limited Partnership - Answer 1. General partners have right to participate in
management
2. Limited partners have limited liability for business obligations
3. Choice of taxation, deductible losses and expenses
4. Survives withdrawal of partner (except sole general partner)
C Corporation - Answer The most common type of corporation, which is a legal business
entity that offers limited liability to all of its owners, who are called stockholders
Advantages of C Corporations - Answer -Owners liable only up to the amount of their
investment
-Easier to raise capital
-No restrictions on # of shareholders
-Stock is liquid if traded on major stock exchange
-Stock options for employees
Disadvantages of a corporation - Answer -double taxation
-cost of setup and report filing
S corporation - Answer A unique government creation that looks like a corporation but is
taxed like sole proprietorships and partnerships
Advantages of S Corporation - Answer -Avoids double taxation of a corporation
-Retains the corporation's legal benefit of limited liability
Limited Liability Company (LLC) - Answer A hybrid form of business enterprise that offers the
limited liability of the corporation but the tax advantages of a partnership.
work environment - Answer the physical conditions and the psychological atmosphere in
which employees work
, hiring process - Answer Advertising, Unsolicited Resumes and Word of Mouth
Equal Employment Opportunity
Civil Rights Act of 1984
ADA- American Disabilities Act
Review of past Work
Contract for Employment
Non-Compete Clause
Fair Credit Reporting Act (FCRA) - Answer U.S act that protects privacy of background
information and ensures that information supplied is accurate.
Drug-Free Workplace Act - Answer U.S. law that requires federal contractors with contracts
of $100,000 or more as well as recipients of grants from federal government to certify they are
maintaining a drug-free workplace.
Polygraph Protection Act of 1988 - Answer Prohibits employers in the private sector from
using lie-detector tests in all employment decisions
Immigration Reform and Control Act of 1986 - Answer Act that prohibits discrimination
against job applicants on the basis of national origin or citizenship; establishes penalties for
hiring illegal aliens and requires employers to establish each employee's identity and eligibility
to work.
Fair Labor Standards Act (FLSA) - Answer U.S act that establishes minimum wage, overtime
pay, youth employment, and record-keeping standards affecting full-time and part-time workers
in the private sector and in federal, state, and local governments.
Employee Retirement Income Security Act (ERISA) - Answer Act that established uniform
minimum standards for employer-sponsored retirement and health and welfare benefit
programs.
Health Insurance Portability and Privacy Act - Answer Specifics the privacy of employees
health data.
Family and Medical Leave Act (FMLA) - Answer U.S act that provides employees with up to
12 weeks of unpaid leave to care for family members or because of a serious health condition of
the employee.
