Exam Cheat Sheet · Quick Reference

Tennessee Business and Law Management Exam

Tennessee  ·  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
50
Passing score
73%
Exam time
150 min
Administered by
Prov
Format
Reference materials allowed

Tennessee State Portion 50 questions

Business Organization 4 Q · 8%
Liability and taxation differences across business structures
Licensing 5 Q · 10%
Contractor license threshold and definition of contracting ($25,000 rule)Licensing application process and required documentationLicense classifications and monetary limitationsLicense renewal requirements, fees, and late penaltiesExemptions from contractor licensing requirementsLicense revisions including monetary limit increases and qualifying agent changesReciprocity agreements and out-of-state applicantsPenalties for unlicensed contracting and unlawful bidding
Estimating and Bidding 7 Q · 14%
Quantity take-off method and cost componentsLabor cost calculation and labor burdenMaterials cost determination and supplier biddingProject overhead vs. company overhead calculationMarkup, profit margin, and cost-based pricingBid documents, bid package requirements, and submission proceduresEthics in bidding: bid shopping, bid peddling, and bid riggingEstimating pitfalls, job cost recording systems, and estimating frameworks
Contracts 6 Q · 12%
Required elements of a binding contract (offer and acceptance, consideration, competent parties, legal purpose)Types of construction contracts (lump-sum, unit-price, cost-plus)Breach of contract types, remedies, and liquidated damagesProgress payments, retainage requirements, and final payment documentationRisk allocation provisions (force majeure, indemnification, differing site conditions, warranties, delays)Change orders and contract modificationsAlternative dispute resolution methods (negotiation, mediation, arbitration)Tennessee Prompt Pay Act requirements and remedies
Project Management 4 Q · 8%
Scheduling basics: sequence of tasks, activity duration, and the critical pathScheduling methods: bar (Gantt) charts, critical path method (CPM), and calendar schedulesProject supervisory team roles: project manager, superintendent, and foremanMonitoring and updating the schedule; communication with the owner, crew, and subcontractorsQuality control during construction: submittals, shop drawings, and inspectionsContract administration on the job: change orders, job records, and project closeout
Risk Management 4 Q · 8%
Types of insurance coverage for contractors (property, liability, automobile, burglary/theft)Surety bonds: types, language, and qualifying requirementsWorkers' compensation requirements in TennesseeCommercial general liability (CGL) and umbrella insurance policiesBond claims and laws governing federal and Tennessee state public construction projectsRisk allocation provisions in construction contracts (indemnification, force majeure, differing site conditions)Insurance coverage verification and requirements for subcontractorsCoverage gaps, overlaps, and employment-related insurance (unemployment, social security)
OSHA Safety 5 Q · 10%
OSHA standards, recordkeeping requirements, and injury/illness forms (300, 300A, 301)OSHA penalty types and amounts for violationsHazardous materials handling: Safety Data Sheets (SDS) and Hazard Communication StandardLead-based paint regulations and Lead Pre-Renovation Education Rule (Lead PRE)Asbestos identification, notification requirements, and TDEC permittingClean Water Act, NPDES stormwater permits, and erosion/sedimentation controlHazardous and non-hazardous solid waste identification, notification, and disposalJobsite safety programs: emergency action plans, substance abuse policies, and safety equipment
Financial Management 3 Q · 6%
Business entity types: characteristics, advantages, and disadvantages (sole proprietorship, partnership, corporation, LLC)Financial statements: balance sheet, income statement, and statement of cash flowsAccounting methods: cash, accrual, completed contract, and percentage of completionFinancial ratios: liquidity, quick, activity, debt, and profitabilityPayroll accounting: gross pay, tax deductions, net pay, and employer tax obligationsBusiness registration and naming requirements in Tennessee
Labor Law 5 Q · 10%
Workers' compensation insurance requirements for construction services providersExemptions from workers' compensation coverage and eligibility criteriaWorkers' compensation exemption registry application and registration processRevocation and reinstatement of workers' compensation exemptionsFair Labor Standards Act minimum wage, overtime, and recordkeeping requirementsChild labor restrictions on working hours and prohibited tasks in constructionKey employment discrimination laws (ADA, Title VII, ADEA, Equal Pay Act)New hire reporting requirements and employee documentation
Tax Law 5 Q · 10%
Employer Identification Number (EIN) requirements and application methodsFederal tax forms by business entity type (sole proprietor, partnership, corporation)Self-employment tax obligations and Schedule SE filing thresholdFederal employment taxes: FICA, federal income tax withholding, and FUTAPayroll tax deposit schedules and penalties for late or incorrect depositsForm W-2 and Form 1099-MISC reporting requirements and deadlinesTennessee state taxes: excise, franchise, sales/use, and unemployment taxesEstimated tax payment thresholds and requirements by entity type
Lien Law 2 Q · 4%
Tennessee mechanics' and materialmen's lien definitions and key terminology (TCA 66-11-101)Who is entitled to file a lien: prime contractors, remote contractors, and property type distinctions (commercial, residential, owner-occupied)Deadlines and procedures for filing a lien: direct lienors (1 year) vs. indirect lienors (90 days)Notice of completion and its effect on lien filing deadlines (10 days residential, 30 days commercial)Lien priority over mortgages and other liensTennessee Prompt Pay Act: retainage limits, payment timelines, escrow requirements, and remedies for nonpaymentNotice of nonpayment requirements for remote contractorsMisapplication of loan proceeds and contract payments as felony offenses

Key Distinctions

Bid peddlingvsBid shopping

Bid peddling is when a subcontractor approaches the general contractor after the project is awarded intending to undercut the price submitted on bid day, while bid shopping is when the general contractor reveals original bids to seek lower offers from other subcontractors.

NASCLA Contractors Guide, Tennessee (4th ed.), Page 7-2
Bid riggingvsBid shopping

Bid rigging is collusion in which contractors coordinate their bids to fix the award outcome of a project, whereas bid shopping is seeking lower subcontractor bids after original bids are submitted.

NASCLA Contractors Guide, Bidding and Estimating chapter — Bid Rigging section
All-risk builders' risk insurancevsNamed peril builders' risk insurance

All-risk covers direct loss by perils not specifically excluded by the policy (covering almost all risks), while named peril has narrower coverage that specifies the perils covered, such as fire and lightning.

NASCLA Contractors Guide, Managing Risk chapter — Insurance section
Erosion control measuresvsSediment control measures

Erosion control places mulch and vegetation as soon as feasible to permanently stabilize site soil, while sediment control (silt fences, hay bales) is placed at the down gradient side of the construction site.

NASCLA Contractors Guide, Jobsite Safety and Environmental Factors chapter — Sedimentation and Erosion Control Measures section
Direct lienorvsIndirect lienor

A direct lienor in privity with the owner has one year to file a lien, while an indirect lienor (such as a subcontractor contracting with the prime contractor) has 90 days after completion or termination of the work.

NASCLA Contractors Guide, Tennessee (4th ed.), Chapter 16 — Direct Lienor / Indirect Lienor sections
C corporationvsS corporation

A C corporation permits an unlimited number of shareholders but is taxed at the corporate level, while an S corporation is a domestic corporation limited to no more than 100 U.S. citizen/resident shareholders with only one class of stock that passes income, loss, deduction, and credit items through to shareholders' separate returns.

NASCLA Contractors Guide, Tennessee (4th ed.), Chapter 2 — S Corporations section
Limited liability companyvsS corporation

An LLC may have an unlimited number of members with ownership held in memberships and is not taxed at the entity level, while an S corporation is limited to 100 shareholders holding shares of stock.

NASCLA Contractors Guide, Tennessee (4th ed.), Pages 2-4 to 2-5 — Limited Liability Company (LLC) and Summary of Business Legal Structures sections
ArbitrationvsMediation

An arbitrator acts as a third-party neutral judge and renders a decision by which all parties are legally bound (nearly all states adopted the Uniform Arbitration Act), unlike a mediator who does not render a binding decision.

NASCLA Contractors Guide, Tennessee (4th ed.), Chapter 8 (Contract Management) — Alternative Dispute Resolution / Arbitration section
Negotiation communicationvsOffer and acceptance

Parties are not bound during negotiation, so a contractor must make clear a communication is for negotiation purposes to avoid it being misconstrued as an offer; a binding contract requires an offer accepted as made, and a signature returning altered terms is a counteroffer, not acceptance.

NASCLA Contractors Guide, Contract Management chapter — Negotiation section
Liquidated damagesvsActual damages

They are mutually exclusive remedies: an owner who sues for liquidated damages (the contracted per-day amount) cannot also sue for actual damages.

NASCLA Contractors Guide, Contract Management chapter — Breach of Contract section
First aid (OSHA recordkeeping)vsMedical treatment (OSHA recordkeeping)

Administering tetanus immunizations is first aid, while other immunizations such as Hepatitis B or rabies vaccine, sutures/staples or other wound-closing devices, and devices with rigid stays designed to immobilize body parts are medical treatment.

NASCLA Contractors Guide, Tennessee (4th ed.), Chapter 12 — OSHA Recordkeeping section
Reviewed financial statementvsAudited financial statement

A reviewed statement prepared by a licensed CPA or PA is required for monetary limits of $3,000,000 and less, while an audited statement is required for limits exceeding $3,000,000; a renewal applicant requesting a limit of $1,500,000 or less may instead submit a notarized statement that the financial statement information is true and correct.

NASCLA Contractors Guide, Tennessee (4th ed.), Page 3-3

Key Terms

Contractor (Tennessee licensing threshold) NASCLA Contractors Guide, Tennessee (4th ed.), Appendix E, Page E-1
Any person or entity that undertakes construction work with a total cost of $25,000 or more, which triggers the contractor's license requirement.
Masonry contractor threshold NASCLA Contractors Guide, Tennessee (4th ed.), Appendix E, Page E-1
For a licensed masonry contractor, 'contractor' includes the masonry portion of a construction project the total cost of which exceeds $100,000 in materials and labor.
Certificate of license expiration NASCLA Contractors Guide, Tennessee (4th ed.), Appendix E, Page E-12
A Tennessee contractor's license certificate expires and becomes invalid on the last day of the twenty-fourth month following its issuance or renewal unless renewed.
Qualifying agent NASCLA Contractors Guide, Tennessee (4th ed.), Appendix E, Page E-12
The individual who took the examination for a partnership or corporation; if that person leaves the firm the entity has three months to designate someone to take the examination, and the Board must be notified within ten days of a qualifying agent's death, resignation, termination, or incapacity.
Small commercial building contractor NASCLA Contractors Guide, Tennessee (4th ed.), Appendix E, Page E-12
A classification authorized to bid on and contract for construction, erection, alteration, repair or demolition of any building or structure for use and occupancy by the general public, the total cost of which does not exceed $1,500,000.
Monetary limitation exception NASCLA Contractors Guide, Tennessee (4th ed.), Appendix E, Page E-3
The Board for Licensing Contractors may grant an exception to a license's monetary limitation in an amount not to exceed ten percent (10%) of that limitation.
Unlicensed contracting NASCLA Contractors Guide, Tennessee (4th ed.), Appendix E, Page E-15
Any person, firm, or corporation that engages or offers to engage in contracting without the required license commits a Class A misdemeanor.
Addendum NASCLA Contractors Guide, Tennessee (4th ed.), Page 7-2
A document issued to communicate changes made to a bid package before bids are due; it becomes part of the bid documents and ultimately part of the contract when awarded.
Material breach NASCLA Contractors Guide, Contract Management chapter — Breach of Contract section
A serious violation of the contract — such as a contractor refusing to perform or complete a job or an owner refusing to pay — that may void the contract and will most likely end up in litigation.
Indemnity / indemnification clause NASCLA Contractors Guide, Managing Risk chapter — Insurance section
A way to transfer risk that absolves the indemnified party from payment for losses and damages incurred by a third party, shifting that payment or liability to another party; such clauses must be examined to confirm liability is properly distributed between contractor and owner.
Artistic changes clause NASCLA Contractors Guide, Tennessee (4th ed.), Chapter 8 (Contract Management) — Provisions to Limit Risk / Artistic Changes Clause section
A provision addressing revisions made by the architect or design professional for artistic or creative purposes that caps (limits) the number of such changes permitted during the project.
Labor burden NASCLA Contractors Guide, Tennessee (4th ed.), Page 7-4
Employer obligations such as employment taxes and insurance (Medicare, social security, federal and state unemployment insurance, workers' compensation, liability insurance, company benefits) that add approximately 30 percent to labor cost.
Uniform Arbitration Act NASCLA Contractors Guide, Tennessee (4th ed.), Chapter 8 (Contract Management) — Alternative Dispute Resolution / Arbitration section
The federal uniform law adopted by nearly all states that makes an award rendered by a third-party neutral acting as judge binding under both state and federal law.
SUTA dumping NASCLA Contractors Guide, Tennessee (4th ed.), Chapter 4 (Managing Risk) — Unemployment Insurance / SUTA Dumping section
A transfer of employees between businesses for the purpose of obtaining a lower unemployment compensation tax rate; it is prohibited and subject to criminal and/or civil penalties under state law.
Retainage limit (Prompt Pay Act) NASCLA Contractors Guide, Tennessee (4th ed.), Chapter 24 (TCA 66-34-103(a) and (e))
Retainage may not exceed 5% of the contract amount; failure to comply is a Class A misdemeanor subject to a fine only of $3,000, and each day of noncompliance is a separate violation punished consecutively until remediated.
Limited liability company (LLC) NASCLA Contractors Guide, Tennessee (4th ed.), Page 2-4 — Limited Liability Company (LLC) section
An entity registered in Tennessee by filing Articles of Organization (Form SS-4270) with the Secretary of State that shields members from liability for business obligations and other members' acts, but — like a sole proprietorship — does not protect a member from liability for his or her own personal actions.

Formulas to Know

Percentage of completion — cumulative earnings(Costs incurred to date ÷ Estimated total costs) × Contract amount; example: $12,140 ÷ $42,150 = 28.80%, × $50,000 = $14,400
Quick ratio (acid test)(Current assets − Inventory) ÷ Current liabilities; a quick ratio of one or more is generally acceptable to most creditors
Liquidity (current) ratioCurrent assets ÷ Current liabilities; greater than one = positive liquidity position (example: $96,000 ÷ $80,000 = 1.20)
Activity ratio — average collection periodRevenue ÷ Days in the business year = Sales per day; then Current receivables ÷ Sales per day = Average collection period (example: $545,600 ÷ 365 ≈ $1,495; $25,200 ÷ $1,495 ≈ 17 days)
Profitability ratio (profit margin)Net income ÷ Revenues (example: $46,300 ÷ $545,600 ≈ 8.5%); the higher the percentage, the more profitably the company is performing
Statement of owners' equity — ending equityBeginning owners' equity + Net income − Distributions to owners (example: $92,400 + $46,300 − $74,000 = $64,700)
Net pay (payroll)Gross pay − all taxes and deductions (example: $3,200 − ($384 + $198.40 + $46.40 + $160 + $96) = $2,315.20)
Labor cost per task (quantity take-off)Required labor hours per task × Labor rate = Labor cost per task
Overhead percentages and bid priceEach overhead category ÷ Total revenues = overhead % (e.g., $220,000 ÷ $2,000,000 = 11% company; $160,000 ÷ $2,000,000 = 8% project); direct costs % = 100% − company OH% − project OH%, and bid price = direct costs ÷ that percentage
Activity duration (scheduling)Estimated labor hours ÷ hours dedicated to the task per day = duration in working days (example: 15 labor hours ÷ 3 hours/day = 5 working days)
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