Brightwood - Practice Management ARE 5.0
UPDATED ACTUAL Exam Questions and
CORRECT Answers
Sole Proprietorship - CORRECT 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 - CORRECT 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? - CORRECT ANSWER - When
the business experiences expensive or losses they may be deducted from the gross income of the
business.
Disadvantages of Sole Proprietorship - CORRECT ANSWER - Limited to life of owner
Equity capital limited to owner's personal wealth
Unlimited liability
Difficult to sell ownership interest
Partnership - CORRECT ANSWER - A business in which two or more persons combine
their assets and skills
Advantages of Partnership - CORRECT 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 - CORRECT ANSWER - Unlimited liability
Partnership dissolves when one partner dies or wishes to sell
Difficult to transfer ownership
General partnership agreement - CORRECT ANSWER - A written agreement that partners
sign to form a general partnership.
Advantages of General Partnership - CORRECT ANSWER - ability to pool financial
resources, ability to share responsibilities and capitalize on complementary skills, ease of
formation, possible tax advantages
Limited Partnership (LP) - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT ANSWER - -double taxation
-cost of setup and report filing
S corporation - CORRECT ANSWER - A unique government creation that looks like a
corporation but is taxed like sole proprietorships and partnerships
Advantages of S Corporation - CORRECT ANSWER - -Avoids double taxation of a
corporation
-Retains the corporation's legal benefit of limited liability
Limited Liability Company (LLC) - CORRECT ANSWER - A hybrid form of business
enterprise that offers the limited liability of the corporation but the tax advantages of a
partnership.
work environment - CORRECT ANSWER - the physical conditions and the psychological
atmosphere in which employees work
hiring process - CORRECT 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) - CORRECT ANSWER - U.S act that protects privacy
of background information and ensures that information supplied is accurate.
, Drug-Free Workplace Act - CORRECT 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 - CORRECT ANSWER - Prohibits employers in the
private sector from using lie-detector tests in all employment decisions
Immigration Reform and Control Act of 1986 - CORRECT 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) - CORRECT 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) - CORRECT ANSWER - Act that
established uniform minimum standards for employer-sponsored retirement and health and
welfare benefit programs.
Health Insurance Portability and Privacy Act - CORRECT ANSWER - Specifics the
privacy of employees health data.
Family and Medical Leave Act (FMLA) - CORRECT 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.
Employers must withhold a certain amount of pay from employees paycheck for? - CORRECT
ANSWER - Income Taxes
Social Security Taxes
Medicare Taxes
UPDATED ACTUAL Exam Questions and
CORRECT Answers
Sole Proprietorship - CORRECT 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 - CORRECT 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? - CORRECT ANSWER - When
the business experiences expensive or losses they may be deducted from the gross income of the
business.
Disadvantages of Sole Proprietorship - CORRECT ANSWER - Limited to life of owner
Equity capital limited to owner's personal wealth
Unlimited liability
Difficult to sell ownership interest
Partnership - CORRECT ANSWER - A business in which two or more persons combine
their assets and skills
Advantages of Partnership - CORRECT 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 - CORRECT ANSWER - Unlimited liability
Partnership dissolves when one partner dies or wishes to sell
Difficult to transfer ownership
General partnership agreement - CORRECT ANSWER - A written agreement that partners
sign to form a general partnership.
Advantages of General Partnership - CORRECT ANSWER - ability to pool financial
resources, ability to share responsibilities and capitalize on complementary skills, ease of
formation, possible tax advantages
Limited Partnership (LP) - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT ANSWER - -double taxation
-cost of setup and report filing
S corporation - CORRECT ANSWER - A unique government creation that looks like a
corporation but is taxed like sole proprietorships and partnerships
Advantages of S Corporation - CORRECT ANSWER - -Avoids double taxation of a
corporation
-Retains the corporation's legal benefit of limited liability
Limited Liability Company (LLC) - CORRECT ANSWER - A hybrid form of business
enterprise that offers the limited liability of the corporation but the tax advantages of a
partnership.
work environment - CORRECT ANSWER - the physical conditions and the psychological
atmosphere in which employees work
hiring process - CORRECT 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) - CORRECT ANSWER - U.S act that protects privacy
of background information and ensures that information supplied is accurate.
, Drug-Free Workplace Act - CORRECT 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 - CORRECT ANSWER - Prohibits employers in the
private sector from using lie-detector tests in all employment decisions
Immigration Reform and Control Act of 1986 - CORRECT 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) - CORRECT 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) - CORRECT ANSWER - Act that
established uniform minimum standards for employer-sponsored retirement and health and
welfare benefit programs.
Health Insurance Portability and Privacy Act - CORRECT ANSWER - Specifics the
privacy of employees health data.
Family and Medical Leave Act (FMLA) - CORRECT 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.
Employers must withhold a certain amount of pay from employees paycheck for? - CORRECT
ANSWER - Income Taxes
Social Security Taxes
Medicare Taxes
