Exam Cheat Sheet · Quick Reference
Arkansas Contractor Business and Law Exam
Arkansas · PSI Services Contractor
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
50
Passing score
70%
Exam time
120 min
Administered by
PSI Services Contractor
Format
Reference materials allowed
Arkansas State Portion 50 questions
Business Management
4 Q · 8%
Arkansas registration and filing requirements for business entities (Secretary of State, franchise tax reports)Business naming rules, fictitious name filing, and Arkansas contractor license name requirementsBusiness plan development: elements, functions, and pitfallsTime management, delegation, and business ethics for contractorsMarketing, promotional strategies, and sales process management
Contracts and Agreements
5 Q · 10%
Environmental Laws and Regulations
2 Q · 4%
U.S. EPA and Arkansas ADEQ roles and regulatory programsKey federal environmental laws applicable to construction (Clean Water Act, Clean Air Act, ESA, NEPA, NHPA)Air quality requirements: indoor and outdoor pollutants and permittingAsbestos identification, ADEQ notification, and removal requirementsStormwater management and NPDES permitting for construction sitesSedimentation and erosion control best management practicesHazardous and non-hazardous solid waste identification, disposal, and notification requirementsLead hazards: worker exposure limits, engineering controls, and Lead Pre-Renovation Education Rule (Lead PRE)
Estimating and Bidding
5 Q · 10%
Financial Management
4 Q · 8%
Insurance and Bonding
5 Q · 10%
Workers' compensation insurance requirements for Arkansas contractors and subcontractorsArkansas $10,000 contractors bond filing requirement for commercial licensureArkansas state public project bond thresholds (5% bid bond over $20,000; performance/payment bonds over $50,000)Miller Act and Little Miller Act bonding requirements for federal and state public construction projects
Labor Laws and Employment Regulations
3 Q · 6%
Arkansas new hire reporting requirements and proceduresArkansas Workers' Compensation — coverage requirements, benefits, and fraud
Project Management
4 Q · 8%
OSHA Recordkeeping and Reporting
2 Q · 4%
OSHA Forms 300, 300A, and 301 — purpose and completion requirementsEmployer exemptions from recordkeeping (size and industry classifications)Recordability criteria — work-relatedness, new case determination, and general recording triggersFirst aid versus medical treatment distinctions for recordkeeping purposesMandatory reporting of fatalities, hospitalizations, amputations, and loss of an eye (timeframes and methods)Record retention requirements for injury/illness logs and exposure/medical recordsAnnual summary posting requirements (Form 300A — dates and certification)Employee rights and privacy protections in the recordkeeping system
Tax Laws
3 Q · 6%
Arkansas state tax specifics: withholding, corporation, partnership, and S corporation filing requirements
Arkansas Lien Laws
4 Q · 8%
Who is entitled to a mechanics' lien (eligible parties)Definitions of contractor, subcontractor, material supplier, and privityPreconstruction notice requirements for residential projects (4 or fewer units)75-day notice requirement for commercial projects10-day notice before filing a lienFiling requirements and deadlines for a lien (120-day rule, required contents, affidavit)Priority of liens and commencement of constructionBonding around a lien (filing, notification, sufficiency challenge)
Arkansas Contractor Rules and Regulations
9 Q · 18%
Commercial contractor licensing thresholds and definitionsResidential contractor licensing thresholds and definitionsExemptions from contractor licensing requirementsLicense application process and qualifying party requirementsFinancial statement and surety bond requirements for licensureLicense classifications and authorized scope of workLicense expiration, renewal procedures, and late renewal penaltiesProhibited acts and civil and criminal penalties for violations
Key Distinctions
Bid shoppingvsBid peddling
Bid shopping is the general contractor approaching subcontractors other than those who submitted bids to seek a lower offer than originally quoted, while bid peddling is the subcontractor approaching the general contractor after award intending to lower the price submitted on bid day.
NASCLA Contractors Guide, Bidding and Estimating chapter — Bid Peddling sectionArbitrationvsMediation
In arbitration a third-party arbitrator acts as a judge and renders an arbitral award that legally binds all parties (binding under both state and federal law since nearly all states adopted the federal Uniform Arbitration Act), while in mediation an independent third-party mediator only facilitates dialogue and the parties themselves set the terms of any agreement.
NASCLA Contractors Guide, Contract Management chapter — Arbitration sectionAll-risk builders' risk insurancevsNamed peril builders' risk insurance
All-risk covers direct loss by perils that are not specifically excluded by the policy (almost all risks), while named peril is narrower and specifies which perils are covered, such as fire and lightning.
NASCLA Contractors Guide, Managing Risk chapter — Insurance sectionProject overhead costsvsCompany overhead costs
Project overhead includes bonds, temporary storage, temporary office, security guard, utilities, dumpsters and portable toilets, while company overhead includes items like office rent, accounting fees and legal fees.
NASCLA Contractors Guide, Bidding and Estimating chapter — Add Project Overhead sectionUnit price estimating methodvsQuantity take-off method
The unit price method bundles all cost factors (labor, materials, equipment, subcontractors) into a single unit price for the entire task, while the quantity take-off method estimates each component individually.
NASCLA Contractors Guide, Bidding and Estimating chapter — Other Methods of Estimating sectionMaterial breachvsImmaterial (partial) breach
A material breach is a serious violation (e.g., contractor refuses to perform or owner refuses to pay) that may void the contract and will most likely end in litigation, while an immaterial or partial breach usually does not terminate the contract and the injured party may only sue for the value of the damages suffered.
NASCLA Contractors Guide, Contract Management chapter — Breach of Contract sectionGeneral partnervsLimited partner
In a limited partnership the general partner has personal and unlimited liability for all actions and debts taken in the name of the business, while the limited partner has no personal liability and is liable only for the previously agreed-upon contribution or investment.
NASCLA Contractors Guide, Choosing Your Business Structure chapter — Partnerships sectionSingle-member LLC taxationvsMulti-member LLC taxation
An LLC with one owner is taxed as a sole proprietorship, while an LLC with more than one owner may elect to be taxed as a partnership or as a corporate entity; LLCs are not taxed at the entity level unless they choose to be.
NASCLA Contractors Guide, Choosing Your Business Structure chapter — Limited Liability Company (LLC) sectionErosion control measurevsSediment control measure
Erosion control means placing mulch and vegetation as soon as feasible to permanently stabilize site soil, while sediment control measures include silt fence and hay bales placed on the down-gradient side (a water misting system instead controls dust and soil loss).
NASCLA Contractors Guide, Arkansas (8th ed.), Chapter 12 — Sedimentation and Erosion Control Measures sectionFirst aid (OSHA recordkeeping)vsMedical treatment (OSHA recordkeeping)
Under 29 CFR 1904.7(b)(5)(ii), tetanus immunizations, eye patches and draining a blister are first aid, while other immunizations such as hepatitis B or rabies vaccine are medical treatment.
NASCLA Contractors Guide, Arkansas (8th ed.), Chapter 12 (Jobsite Safety and Environmental Factors) — 29 CFR §1904.7(b)(5)(ii)NPDES permits (ADEQ Water Permits Division)vsState Permits (ADEQ Water Permits Division)
NPDES permits prepared by the division are Discharge, Stormwater Construction, Stormwater Industrial, Stormwater MS4 and Pretreatment, while the three State Permits are Industrial Process (no discharge), Waste Disposal (no discharge) and Underground Injection Control.
NASCLA Contractors Guide, Arkansas (8th ed.), Chapter 12 — Water Permits Division sectionArkansas annual franchise tax — LLCvsArkansas annual franchise tax — profit corporation with outstanding capital stock
An LLC pays a flat $150 annual fee, while a corporation with stock pays .3 percent of the outstanding capital stock with a $150 minimum.
NASCLA Contractors Guide, Arkansas (8th ed.), Chapter 2 — Annual Franchise Tax Report sections (Corporations and LLCs)Key Terms
Addendum NASCLA Contractors Guide, Bidding and Estimating chapter — Bid Documents section
The document issued when changes are made to a bid package before the bid is due; it becomes part of the bid documents and ultimately part of the contract when awarded.
Allowance NASCLA Contractors Guide, Bidding and Estimating chapter — Add Allowances section
An amount specified in the estimate representing the owner's budget for items not specified in the project plans (such as carpeting, fixtures or lighting), with the contract addressing who pays any difference if the owner's choices exceed or fall short of it.
Unresponsive bidder NASCLA Contractors Guide, Bidding and Estimating chapter — Bid Documents section
A bidder may be found 'unresponsive' if information in the bid package is incorrectly submitted or omitted altogether.
Bid peddling NASCLA Contractors Guide, Bidding and Estimating chapter — Bid Peddling section
An unethical practice in which a subcontractor approaches the general contractor after the project was awarded intending to lower the original price submitted on bid day.
Bid shopping NASCLA Contractors Guide, Bidding and Estimating chapter — Bid Shopping section
An unethical practice in which the general contractor approaches subcontractors other than those who submitted bids to seek a lower offer than the original quotes.
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.
Cost-plus contract NASCLA Contractors Guide, Contract Management chapter — Cost-Plus Contract section
A contract under which the contractor is reimbursed for the actual cost of labor and materials and paid a markup fee for overhead and profit, calculated as either a percentage or a fixed fee.
Boilerplate provisions NASCLA Contractors Guide, Contract Management chapter — Boilerplate Provisions section
Standard language or clauses (sometimes called 'miscellaneous' clauses) that generally appear at the end of a contract to protect the business in the event of a lawsuit, such as attorney's fees, arbitration and consent to jurisdiction.
Indemnification clause NASCLA Contractors Guide, Contract Management chapter — Provisions to Limit Risk section
A contract provision that shifts payment or liability for losses or damages incurred by a third party away from the indemnified party, and must be carefully examined to ensure proper liability distribution between contractor and owner.
Equipment floater policy NASCLA Contractors Guide, Managing Risk chapter — Equipment Floater Policy section
A type of inland marine insurance covering direct physical loss to tools and equipment while stored on premises, in transit, or at temporary locations or jobsites.
Owner (Ark. Code Ann. § 17-25-101(e)) NASCLA Contractors Guide, Arkansas (8th ed.), Appendix E, § 17-25-101(e)
Under the commercial contractor licensing law, a person who owns property or is a lessee of property; a prime contractor is separately defined in § 17-25-101(g) as one who contracts directly with the owner.
Contractor (A.C.A. § 18-44-107(1)) NASCLA Contractors Guide, Arkansas (8th ed.), Appendix G — A.C.A. § 18-44-107(1)
Under the mechanics' and materialmen's lien law, any person who contracts orally or in writing directly with a person holding an interest in real estate, or that person's agent, for construction of an improvement to or repair of real estate.
Subcontractor (A.C.A. § 18-44-107(4)) NASCLA Contractors Guide, Arkansas (8th ed.), Appendix G — A.C.A. § 18-44-107
Any person who supplies labor or services pursuant to a contract with the contractor, or with a person in direct privity of contract with the contractor, and who may claim a lien even without privity with the owner.
Full time employee (Rules 224-25-12(d) and 224-25-5-13(c)) NASCLA Contractors Guide, Arkansas (8th ed.), Appendix E, Rule 224-25-12(d); Appendix F, Rule 224-25-5-13(c)
A person who works on average 30 or more hours a week (1,500 hours per year), is paid on a W-2 rather than a 1099, and is not hired job to job — the standard a non-owner qualifying party must meet.
Own residence (Rule 224-25-5-13(f); § 17-25-513(1)) NASCLA Contractors Guide, Arkansas (8th ed.), Appendix F, Rule 224-25-5-13(f); § 17-25-513(1)
The personal residence, principal place of abode, or domicile — a residence constructed for the occupancy of the person who owns the property; the exemption covers only one per calendar year and a house built for rental occupancy does not qualify.
Improve status (Board Rule 224-25-6(d)) NASCLA Contractors Guide, Arkansas (8th ed.), Appendix E, Rule 224-25-6(d)
A status in which an applicant's license is extended thirty (30) days pending further information or corrective changes, effective only until the next regular Board meeting, at which it expires unless further action is taken.
Formulas to Know
Minimum penal sum of surety bond filed in lieu of a financial statement (Ark. Code Ann. § 17-25-304(c)(2))
Bond = 10 × required business-related net worth for the license/registration classification (worked example: 10 × $50,000 = $500,000)Bid price after adding overhead
Bid Price = Direct Costs ÷ (1 − total overhead %) (worked example: 9% project + 11% company = 20% overhead, so $100,000 ÷ 0.80 = $125,000)Labor cost per task (quantity take-off method)
Required Labor Hours per Task × Labor Rate = Labor Cost per TaskTotal material cost per unit
Price per Unit × Number of Units Needed = Total Material Unit Cost (obtain at least three supplier bids)Project equipment cost for owned equipment
Hourly unit cost = Total Yearly Operating/Maintenance Cost ÷ Estimated Annual Hours; Project cost = hourly unit cost × project hours (worked example: $30,000 ÷ 1,000 = $30/hr; $30 × 40 hr = $1,200)Activity duration
Duration = Total Labor Hours ÷ Hours per Day Available for the Task (worked example: 16 hr ÷ 4 hr/day = 4 working days)Cumulative earnings — percentage of completion method
% Complete = Project Costs Incurred ÷ Total Estimated Costs; Cumulative Earnings = % Complete × Contract Amount (worked example: $80,000 ÷ $160,000 = 50%; 50% × $200,000 = $100,000)Quick ratio (acid test ratio)
(Current Assets − Inventory) ÷ Current Liabilities (worked example: ($150,000 − $30,000) ÷ $100,000 = 1.20); a ratio of one or more is generally acceptable to most creditorsStraight-line depreciation (yearly amount)
(Initial Asset Cost − Salvage Cost) ÷ Useful Life in Years (worked example: ($80,000 − $5,000) ÷ 5 = $15,000/year)Profitability ratio (profit margin)
Net Income ÷ Revenues (worked example: $46,300 ÷ $545,600 ≈ 8.5%); the higher the percentage, the more profitably the company is performing