Accounting NAF Exam with Accurate
Solutions
Advantages of a sole proprietorship - correct answer-Easy and inexpensive to form and
dissolve, No profit sharing, Complete control of company, Few government regulations,
Business profits taxed at personal level.
Disadvantages of a sole proprietorship - correct answer-Unlimited personal liability,
Limited management expertise, Limited access to capital, Extensive time commitments,
Difficult to sell, Limited life
Advantages of a partnership - correct answer-Easy to form, Access to more capital,
More management expertise, Few government regulations, Business profits taxed at
partner level, Easy to change owners
Disadvantages of a partnership - correct answer-Unlimited personal liability, Profit
sharing, Potential disagreements among partners, Difficult to sell, Limited life
Advantages of a corporation - correct answer-Limited personal liability, Management
expertise, Easier to raise capital, Easy to sell, Unlimited life
Disadvantages of a corporation - correct answer-More government regulations, double
taxation, absentee owners
Advantages of a LLC - correct answer-Limited personal liability, Management expertise,
Unlimited life, Business profits taxed at personal level
Disadvantages of a LLC - correct answer-More government regulations, absentee
owners
IRS (Internal Revenue Service) - correct answer-A government regulatory agency that
collects taxes, powers of enforcement, can levy fines, confiscate property, mandatory
relationship
SEC (Securities and Exchange Commission) - correct answer-A government regulatory
agency that protects investors, Helps markets run smoothly, Requires disclosures,
Relies on Financial Accounting Standards Board to generate ideas that become law,
Powers of enforcement
Solutions
Advantages of a sole proprietorship - correct answer-Easy and inexpensive to form and
dissolve, No profit sharing, Complete control of company, Few government regulations,
Business profits taxed at personal level.
Disadvantages of a sole proprietorship - correct answer-Unlimited personal liability,
Limited management expertise, Limited access to capital, Extensive time commitments,
Difficult to sell, Limited life
Advantages of a partnership - correct answer-Easy to form, Access to more capital,
More management expertise, Few government regulations, Business profits taxed at
partner level, Easy to change owners
Disadvantages of a partnership - correct answer-Unlimited personal liability, Profit
sharing, Potential disagreements among partners, Difficult to sell, Limited life
Advantages of a corporation - correct answer-Limited personal liability, Management
expertise, Easier to raise capital, Easy to sell, Unlimited life
Disadvantages of a corporation - correct answer-More government regulations, double
taxation, absentee owners
Advantages of a LLC - correct answer-Limited personal liability, Management expertise,
Unlimited life, Business profits taxed at personal level
Disadvantages of a LLC - correct answer-More government regulations, absentee
owners
IRS (Internal Revenue Service) - correct answer-A government regulatory agency that
collects taxes, powers of enforcement, can levy fines, confiscate property, mandatory
relationship
SEC (Securities and Exchange Commission) - correct answer-A government regulatory
agency that protects investors, Helps markets run smoothly, Requires disclosures,
Relies on Financial Accounting Standards Board to generate ideas that become law,
Powers of enforcement
