Understanding that the test is on how the state interprets your construction trade and California Law is going to be critical to your success.
I have worked with thousands of contractors all over the country, many with decades of experience who have had difficulties with the state exam.
Certain areas of contractor law can be quite confusing especially if you are unfamiliar with it.
Answer the questions as a business owner
Remember that when you are studying for this test, it will be very important to focus on PASSING THE TEST not proving your knowledge to the state board.
This is an exam on how you interpret state law.
Questions are presented to you as if you are running a large scale construction firm with multiple employees. Questions will cover:
- Prevailing Wage Requirements
- Job Site Safety
- Payroll, Bidding and Insurance
The following information is straight from the CSLB website. Study the contents of the examination carefully.
Your success depends on how you score on the most significant portions of the test.
To get up to speed on current state laws, be sure to pick up some study material.
The Contractor License Law Exam is divided into eight major sections:
1. Business Organization (10%)
- Company organization
- Project organization
2. Business Finances (15%)
- Cash management
- Budget and planning
- Financial reporting
3. Employment Requirements (12%)
- Employment regulations
- Evaluation and record-keeping
4. Bonds, Insurance, and Liens (10%)
- Workers’ compensation insurance
- Liens and other remedies
- Other insurance
5. Contract Requirements and Execution (23%)
- Cost control
6. Licensing Requirements (8%)
- Business license
- Contractor’s license
- Activity regulation
7. Safety (15%)
- Training and reporting requirements
- General safety
- Hazardous/unknown materials
8. Public Works (7%)
Contractor License LAW Exam: Sample Questions
The following questions are simulations of the California CSLB law & business test.
1. What information must be included in a stop notice?
a) The kind of labor, services, equipment, or materials furnished or agreed to be furnished
b) The construction loan terms, interest rate, and deadline for project completion
c) The type of zoning, setback, and lot coverage limitations on the permit
d) The type of asbestos, toxic fumes, or hazardous materials found
2. Within how many days must an “agreement to arbitrate” be returned by the participants after being mailed by CSLB’s Registrar?
a) Within 7 calendar days
b) Within 10 calendar days
c) Within 14 calendar days
d) Within 30 calendar days
Construction Health and Safety
The Contractor License Exam will go into the different functions of these government agencies including the:
You will be expected to understand their relationships with the construction industry as well as the differences between state and federal regulations.
- Job Site Safety
- Fair Hiring and Firing Practices
- Labor Laws
- Employee Rights
- Liability and Workers Compensation Insurance
Construction Contracts and Dispute Resolution
You will be expected to understand the processes to file complaints that are available to your clients as well as yourself should a dispute arise during the completion of a project.
You will need to understand:
- Mechanics Leans
- Stop Notices
- 20 Day Preliminary Notices
The state will also test your knowledge of bidding, cost control, balance sheets, income statements, and accounting methods.
You will get questions on the legal processes to settle various types of disputes as well as competent financial reporting.
The exam will consist of questions on the laws and rules governing contractors:
Understanding how companies are organized will be a critical portion of the contractor license exam.
You will be expected to understand the different tax implications, cash management, budgeting, and the different levels of liability associated with each business entity.
- Limited Liability Corporation
- Limited Liability Partnership
- Sole Proprietorship
Accounting Methods and Financial Organization
A critical aspect of running a construction business is having effective methods of accounting.
Understanding the differences between:
- Cash vs Accrual Method
- Percentage of Completion Method
- Completed Contract Method
Additionally, questions be posed to you as if you are operating a large scale business with several employees and projects happening simultaneously.
Understand financial terms like:
- Income statements
- operating expenses
- Gross Profit/Loss
- Net Income and Revenue
- Financial Statements
Learn more about Construction Accounting.
You are trying to get a license because you want to move up in your career, earn more money, have options and ultimately have more freedom in your life.
Investing in yourself is the only way to truly reap the rewards life has to offer.
For more information on the contractor license check out this complete guide to get licensed in California!