Exam Cheat Sheet · Quick Reference

Alabama Home Builder Business and Law Exam

Alabama  ·  PROV

Verified, not estimated. Every figure below is drawn from the official exam structure we maintain — question counts, passing standard and topic weighting. Practice questions are grounded in the source law with statute citations. We omit any figure we can't verify rather than guess at it.
Total questions
40
Passing score
70%
Exam time
120 min
Administered by
PROV
Format
Reference materials allowed

Alabama State Portion 40 questions

Business Organization 2 Q · 5%
Types of business legal structures (sole proprietorship, partnership, corporation, LLC)Advantages and disadvantages of each business structureLiability exposure by business entity typeTax treatment and pass-through taxation by entity typeAlabama registration and filing requirements by entity typeBusiness naming rules, DBA filings, and name reservation in AlabamaBusiness plan components and purposeSmall business assistance resources and certifications (SBA, SCORE, HUBZone, etc.)
Contract Management 5 Q · 12%
Required elements of a binding contract (offer, acceptance, consideration, competent parties, legal purpose)Contract price and payment types (lump-sum, unit-price, cost-plus)Progress payments and retainage requirementsChange orders and contract modificationsBreach of contract types and remedies (material vs. immaterial, liquidated damages)Alternative dispute resolution methods (negotiation, mediation, collaborative law, arbitration)Alabama Prompt Pay Law payment timelines, retainage limits, and interest penaltiesSubcontractor agreements and employee vs. independent contractor classification
Estimating and Bidding 8 Q · 20%
Bid documents, addenda, and bid package componentsEthics in bidding: bid shopping, bid peddling, and bid riggingQuantity take-off method and estimating frameworkLabor cost calculation and labor burdenMaterials cost determination and equipment cost (rent, lease, or buy)Project overhead vs. company overhead and overhead percentage calculationMarkup, profit margin, and cost-based pricingJob cost recording system and estimating pitfalls
Financial Management 5 Q · 12%
Bookkeeping practices and the accounting cycleFinancial statements (balance sheet, income statement, statement of cash flows)Financial ratio analysis (liquidity, quick, activity, debt, profitability ratios)Methods of accounting (cash vs. accrual) and contract accounting methods (completed contract, percentage of completion, cost comparison)Cash flow management, progress payments, and retainageAlabama Prompt Pay Law (Title 8, Chapter 29) — payment timelines, interest penalties, withholding grounds, and exemptionsPayroll accounting and payroll tax deductionsEquipment depreciation methods (straight-line and accelerated/MACRS)
Labor Laws 2 Q · 5%
Fair Labor Standards Act (FLSA) minimum wage and overtime requirementsChild labor laws and restrictions for minors in constructionForm I-9 employment eligibility verification requirementsAmericans with Disabilities Act (ADA) employer obligationsNew hire reporting requirements and proceduresOther federal labor laws (Davis-Bacon Act, FMLA, WARN Act, USERRA, Title VII, ADEA)Required workplace postings under federal and Alabama state lawWorkers' compensation and unemployment compensation basics
Licensing Laws 4 Q · 10%
Definition of residential home builder and licensure thresholdsExemptions from licensure requirementsBoard composition, appointments, and governanceLicense application process and qualifying criteriaLicense renewal, inactive license, and expiration rulesDisciplinary actions, fines, and complaint proceduresHomeowners' Recovery Fund eligibility and claim processPenalties for unlicensed residential home building activity
Lien Laws 1 Q · 2%
Who is entitled to a mechanics' or materialmen's lienFiling requirements for verified lien statementDeadlines for filing a lien by party typePriority of liens relative to mortgages and other encumbrancesNotice of lien requirements for subcontractors and material suppliersBonding around a lien and cash deposit alternativeLien enforcement and foreclosure proceduresLiens on buildings or improvements on leased land
Project Management 5 Q · 12%
Scheduling methods: calendar, bar chart, and critical path method (CPM)Sequence of tasks, activity duration, contingency time, and float timeProject supervisory team roles: superintendent, foreman, and materials expediterBudget and cost controls: tracking cost overruns and job cost systemsMaterials management: just-in-time delivery, purchase orders, and receivingDaily reports and status reports for tracking project progressCustomer communication, change order handling, and negotiation basicsSubcontractor selection, qualification criteria, and employee vs. independent contractor classification
Risk Management 2 Q · 5%
Risk assessment principles and probability of lossProperty insurance types (all-risk builders' risk, named peril, inland marine, equipment floater)Liability insurance types (CGL, umbrella, completed operations, professional liability)Business Owner's Policies (BOPs) and coverage gaps and overlapsEmployment-related insurance (workers' compensation Alabama requirements, unemployment insurance, SUTA dumping)Insurance coverage requirements for subcontractorsSurety bond types (bid, performance, payment, maintenance, fidelity, lien)Federal and Alabama state bonding laws (Miller Act, Construction Industry Payment Protection Act, Title 39)
Safety (Reporting) 2 Q · 5%
OSHA recordkeeping requirements (Forms 300, 300A, and 301)Reporting fatalities and hospitalizations to OSHA within required timeframesRecordable vs. non-recordable injuries and illnesses (first aid definitions)OSHA injury decision tree for determining recordabilityRetention periods for OSHA records, exposure records, and medical recordsHazardous waste and hazardous substance discovery notification requirementsAsbestos notification and demolition/renovation reporting to ADEMEmployee rights to report violations and protections against retaliation
Board Rules 2 Q · 5%
Definitions of key terms (gross negligence, incompetence, misconduct, residential roofing, single lot)Licensing exemptions (owner-builder, agricultural buildings, government employees, general contractors)License types and scope (unlimited, limited, roofers license)Qualifying representative requirements and entity licensingLicense application requirements and financial responsibility standardsLicense renewal, inactive licenses, and consequences of failure to renewEnforcement procedures, disciplinary actions, and grounds for license revocation or suspensionHomeowners' Recovery Fund eligibility, claim procedure, and payment limits
Tax Laws 2 Q · 5%
Employer Identification Number (EIN) requirements and how to obtainFederal income tax filing by business entity type and corresponding IRS formsSelf-employment tax obligations and Schedule SE filing thresholdFederal employment taxes: FICA, federal income tax withholding, and FUTAPayroll tax deposit schedules and penalty rates for late or incorrect depositsForm 1099-MISC reporting requirements for independent contractor paymentsAlabama state-specific taxes: corporate income, business privilege, sales and use, and contractors gross receipts taxKey tax calendar deadlines for W-2, 1099, 940, and 941 filings

Key Distinctions

AddendavsModifications

Addenda are changes made to a contract before the contract award, while modifications are changes made after the contract is signed and executed.

NASCLA Contractors Guide, Contract Management chapter — Making Changes to the Contract section
Bid RiggingvsBid Shopping

Bid rigging is collusion among contractors to fix the award outcome, while bid shopping is a general contractor seeking lower subcontractor offers after original bids are submitted.

NASCLA Contractors Guide, Bidding and Estimating chapter — Bid Rigging section
Bid ShoppingvsBid Peddling

Bid shopping is initiated by the general contractor seeking lower prices from subcontractors, while bid peddling is initiated by a losing subcontractor approaching the general contractor to offer a lower price after award.

NASCLA Contractors Guide, Bidding and Estimating chapter — Bid Peddling section
All-Risk Builders' Risk InsurancevsNamed Peril Builders' Risk Insurance

All-risk covers direct loss from any peril not specifically excluded, while named peril only covers perils explicitly listed in the policy (e.g., fire and lightning).

NASCLA Contractors Guide, Managing Risk chapter — Insurance section
ArbitrationvsMediation

Arbitration produces a legally binding decision rendered by a third-party arbitrator, while mediation has a facilitator who helps parties reach their own terms without a binding ruling.

NASCLA Contractors Guide, Contract Management chapter — Arbitration section
Quantity Take-Off MethodvsUnit Price Method

The quantity take-off method estimates each component of materials and labor individually per task, while the unit price method bundles all cost factors (labor, materials, equipment, subcontractors) into a single price for an entire task.

NASCLA Contractors Guide, Bidding and Estimating chapter — Quantity Take-off section
Unit Price MethodvsSquare-Foot Method

The unit price method bundles all cost factors per task for greater accuracy, while the square-foot method is a quick estimating approach that does not account for project-specific factors affecting cost.

NASCLA Contractors Guide, Bidding and Estimating chapter — Other Methods of Estimating section
Project Overhead CostsvsCompany Overhead Costs

Project overhead costs are expenses tied directly to a specific job (e.g., temporary storage, bonds, dumpsters), while company overhead costs are general business expenses (e.g., office rent, accounting fees, legal fees).

NASCLA Contractors Guide, Bidding and Estimating chapter — Add Project Overhead section
Direct CostsvsIndirect Costs

Direct costs are project-specific expenses such as a crane needed to complete a task, while indirect costs (e.g., small tools, pickup trucks) are factored into project overhead rather than listed as direct equipment costs.

NASCLA Contractors Guide, Bidding and Estimating chapter — Determining Estimated Costs section
Leasing EquipmentvsPurchasing Equipment

Leasing requires no down payment and lease payments are deductible as operating expenses, but purchasing typically costs less in the long run and provides ownership and salvage value.

NASCLA Contractors Guide, Bidding and Estimating chapter — Determining Estimated Costs section
C CorporationvsSole Proprietorship

A C Corporation faces double taxation on earnings (at the corporate and shareholder levels) and requires formal naming conventions, while a sole proprietorship is simpler but requires a fictitious name (DBA) filing only if operating under a name other than the owner's.

NASCLA Contractors Guide, Choosing Your Business Structure chapter — C Corporations section
General PartnershipvsC Corporation

A general partnership dissolves and assets must be distributed when a partner leaves or dies, while a C corporation has a more permanent structure not dependent on individual owners remaining.

NASCLA Contractors Guide, Choosing Your Business Structure chapter — Partnerships section

Key Terms

Addendum NASCLA Contractors Guide, Bidding and Estimating chapter — Bid Documents section
A document issued to communicate changes to a bid package before the bid deadline; it becomes part of the contract upon award.
Bid Peddling NASCLA Contractors Guide, Bidding and Estimating chapter — Bid Peddling section
An unethical practice where a losing subcontractor approaches the general contractor after project award to offer a lower price than the winning subcontractor.
Bid Rigging NASCLA Contractors Guide, Bidding and Estimating chapter — Bid Rigging section
A form of collusion where contractors coordinate their bids to fix the award outcome of a project.
Bid Shopping NASCLA Contractors Guide, Bidding and Estimating chapter — Bid Shopping section
An unethical practice where the general contractor seeks lower offers from subcontractors other than those who already submitted bids.
Labor Burden NASCLA Contractors Guide, Bidding and Estimating chapter — Labor Burden section
Employer obligations such as employment taxes and insurance that add approximately 30 percent to the base labor cost.
Retainage NASCLA Contractors Guide, Scheduling and Project Management chapter — Progress Payments section
A commonly withheld amount (typically 10 percent) from progress payments, released to the contractor after all final approvals are obtained at project completion.
Contingency NASCLA Contractors Guide, Bidding and Estimating chapter — Add Contingencies section
A percentage added to an estimate to protect the contractor against unanticipated problems, with the amount based on the risk level of the project.
Allowance NASCLA Contractors Guide, Bidding and Estimating chapter — Add Allowances section
A specified amount included in an estimate representing the owner's budget for finish items not yet fully specified in the project plans.
Unresponsive Bidder NASCLA Contractors Guide, Bidding and Estimating chapter — Bid Documents section
A bidder found to have incorrectly submitted or omitted required information in the bid package.
MasterFormat NASCLA Contractors Guide, Bidding and Estimating chapter — Estimating Checklist section
A classification system published by the Construction Specifications Institute that groups numbers and job tasks by major construction activities, recommended as an estimating checklist.
Preliminary Estimate NASCLA Contractors Guide, Bidding and Estimating chapter — Preliminary Estimates section
A risky practice of quoting a price to a customer before accurate calculations have been made.
Conceptual Estimate NASCLA Contractors Guide, Bidding and Estimating chapter — Other Methods of Estimating section
An estimate generally prepared by the architect using cost models from previous projects before detailed project documents are available.
Fictitious Name Certificate (DBA) NASCLA Contractors Guide, Choosing Your Business Structure chapter — Sole Proprietorships section
A filing required at a local or state government office allowing a sole proprietorship to operate under a name different from the owner's personal name.
Double Taxation NASCLA Contractors Guide, Choosing Your Business Structure chapter — C Corporations section
A disadvantage of C Corporations where the corporation pays taxes on profits and shareholders also pay taxes on dividends received.
Distribution Code NASCLA Contractors Guide, Bidding and Estimating chapter — Job Cost Recording System section
A single-letter suffix added to an activity classification code in a job cost recording system to identify whether a cost is for material (M), labor (L), equipment (E), or project overhead (P).
Arbitral Award NASCLA Contractors Guide, Contract Management chapter — Arbitration section
The legally binding decision rendered by a third-party arbitrator in an arbitration proceeding, enforceable under both state and federal law through the Uniform Arbitration Act.

Formulas to Know

Labor Cost per TaskRequired Labor Hours × Labor Rate = Labor Cost per Task
Total Material Unit CostPrice per Unit × Number of Units Needed = Total Material Unit Cost
Equipment Unit Cost per HourTotal Yearly Equipment Cost ÷ Estimated Annual Hours of Use = Unit Cost per Hour
Project Equipment CostUnit Cost per Hour × Hours Needed on Project = Project Equipment Cost
Bid Price with Overhead (when overhead % is known)Direct Costs ÷ (1 - Total Overhead %) = Bid Price
Total Overhead PercentageProject Overhead % + Company Overhead % = Total Overhead %
Labor Cost with Labor BurdenBase Labor Cost × 1.30 = Labor Cost Including Burden (approx. 30% added)
Bid Price with MarkupTotal Cost × (1 + Markup %) = Bid Price
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