Exam Cheat Sheet · Quick Reference

Tennessee - Business and Law Management Exam

Tennessee  ·  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
73%
Exam time
140 min
Administered by
PSI Services Contractor
Format
Reference materials allowed

Tennessee State Portion 50 questions

Licensing Requirements 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
Business Organization and Financial Management 7 Q · 14%
Business entity types: characteristics, advantages, and disadvantages (sole proprietorship, partnership, corporation, LLC)Liability and taxation differences across business structuresFinancial 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 obligationsTennessee and federal tax requirements: business, excise, franchise, sales, unemployment, and employment taxesBusiness registration and naming requirements in Tennessee
Tax Laws 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
Labor Laws 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
Project Management and Lien Law 6 Q · 12%
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 nonpayment requirements for remote contractorsNotice of completion and its effect on lien filing deadlines (10 days residential, 30 days commercial)Lien priority over mortgages and other liensMisapplication of loan proceeds and contract payments as felony offensesTennessee Prompt Pay Act: retainage limits, payment timelines, escrow requirements, and remedies for nonpayment
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
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)
Environmental and 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

Key Distinctions

Bid PeddlingvsBid Shopping

Bid peddling is when a subcontractor approaches the general contractor after award to offer a lower price, while bid shopping is when the general contractor reveals original bids to seek lower offers from other subcontractors.

NASCLA Contractors Guide to Business, Law and Project Management – Tennessee, Page 7-2
Company OverheadvsProject Overhead

Company overhead covers general business costs like office rent, accounting fees, and administrative labor, while project overhead covers job-specific costs like bonds, temporary storage, and portable toilets.

NASCLA Contractors Guide to Business, Law and Project Management – Tennessee, Page 7-6
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, Chapter 8 (Contract Management) — Making Changes to the Contract section
Material BreachvsImmaterial (Partial) Breach

A material breach is a serious contract violation that may void the contract and lead to litigation, while an immaterial breach is less serious and typically allows only a suit for damages without terminating the contract.

NASCLA Contractors Guide, Chapter 8 (Contract Management) — Breach of Contract section
C Corporation (Stockholders)vsGeneral Partnership

In a C corporation stockholders are generally not personally liable for business losses, whereas in a general partnership all partners bear unlimited personal liability for business debts.

NASCLA Contractors Guide, Chapter 2 — Summary of Business Legal Structures section
Direct LienorsvsIndirect Lienors

Direct lienors are in privity of contract with the owner, while indirect lienors are remote contractors with no direct contract with the owner; on commercial projects in Tennessee both may file mechanics' liens.

NASCLA Contractors Guide, Chapter 16 — Who is Entitled to a Mechanics' and Materialmen's Lien section
Quantity Take-Off MethodvsUnit Price Method

The quantity take-off method estimates individual material and labor costs separately then adds overhead and profit, while the unit price method bundles all cost factors (labor, materials, equipment, subcontractors) into a single price per unit of work.

NASCLA Contractors Guide to Business, Law and Project Management – Tennessee, Page 7-3
Reviewed Financial StatementvsAudited Financial Statement

A reviewed financial statement is required for Tennessee license monetary limitations of $3,000,000 or less, while an audited financial statement attested to by a licensed CPA or PA is required for limitations exceeding $3,000,000.

NASCLA Contractors Guide, Page 3-3
Renting EquipmentvsOwning Equipment

Renting is most appropriate for short-term, specialized needs or equipment with high maintenance costs, while owning is suited for equipment needed repeatedly across many projects.

NASCLA Contractors Guide to Business, Law and Project Management – Tennessee, Page 7-5
General Contractor License Threshold ($25,000)vsMasonry Contractor License Threshold ($100,000)

A general contractor in Tennessee must be licensed when total project cost is $25,000 or more, while the licensing threshold for masonry contractors applies only when the masonry portion exceeds $100,000 in materials and labor.

NASCLA Contractors Guide, Appendix E, Page E-1
Excusable DelaysvsBreach of Contract (Delays)

Delays not the fault of the prime contractor—such as owner-directed changes or severe weather—are considered excusable and grant time extensions, while delays caused by contractor fault may constitute a breach of contract.

NASCLA Contractors Guide, Chapter 8 (Contract Management) — Provisions to Limit Risk / Delays and Extensions of Time section
Partnership (Form 1065)vsIndividual Partner (Form 1040 / Schedule E)

A partnership files an annual information return using Form 1065, while individual partners report their share of partnership income on Form 1040 with Schedule E.

NASCLA Contractors Guide, Page 15-2

Key Terms

Tennessee Contractor Licensing Threshold NASCLA Contractors Guide, Appendix E, Page E-1
Per Tennessee Code § 62-6-102(4)(A)(i), any person or entity undertaking construction work with a total cost of $25,000 or more must hold a contractor's license.
Tennessee License Certificate Expiration NASCLA Contractors Guide, Appendix E, Page E-12
Per Tennessee Code § 62-6-116(a), a contractor's license certificate expires on the last day of the twenty-fourth month following its issuance or renewal.
Tennessee Late Renewal Penalty NASCLA Contractors Guide, Appendix E, Page E-13
Per Tennessee Code § 62-6-116(f), the renewal fee increases 10% for each month or fraction of a month delayed, capped at twice the normal fee.
Tennessee Unlicensed Contracting Offense NASCLA Contractors Guide, Appendix E, Page E-15
Per Tennessee Code § 62-6-120(a)(1), engaging or offering to engage in contracting without the required license is a Class A misdemeanor.
Tennessee Major Construction Classifications NASCLA Contractors Guide, Appendix E, Page E-11
Per Tennessee Code § 62-6-112(a), there are nine major construction classifications including commercial building, industrial, heavy, highway/railroad/airport, municipal and utility, mechanical, electrical, environmental and special, and residential.
Tennessee Monetary Limitation Exception NASCLA Contractors Guide, Appendix E, Page E-3
Per Tennessee Code § 62-6-103(a)(1), the Board for Licensing Contractors may grant an exception to a contractor's monetary limitation in an amount not to exceed 10% of that limitation.
Tennessee Civil Penalty for Bid Document Violation NASCLA Contractors Guide, Appendix E, Page E-15
Per Tennessee Code § 62-6-119(f), the board may impose a civil penalty not to exceed $5,000 for willful violation of bid document requirements.
Tennessee Qualifying Agent Notification Requirement NASCLA Contractors Guide, Appendix F, Page F-2 (Rule 0680-1-.02)
Per Rule 0680-1-.02(4)(e), the Board must be notified within ten (10) days of the death, resignation, termination, or incapacity of a qualifying agent.
Labor Burden NASCLA Contractors Guide to Business, Law and Project Management – Tennessee, Page 7-4
Employer obligations such as payroll taxes, workers' compensation, liability insurance, and benefits that add approximately 30% to base labor cost.
Bid Peddling NASCLA Contractors Guide to Business, Law and Project Management – Tennessee, Page 7-2
An unethical practice where a subcontractor approaches a general contractor after contract award to offer a lower price than was submitted on bid day.
Differing Site Conditions NASCLA Contractors Guide, Chapter 8 (Contract Management)
A contract provision allocating responsibility for extra costs when actual site conditions differ from what was anticipated during bidding, typically placing liability on the owner for undisclosed information.
Net Profit NASCLA Contractors Guide, Chapter 14 — Income Statement section (Net Profit subsection)
The difference between a company's total revenues and total expenses as shown on the income statement; if negative it reduces net worth.
Cost Code System NASCLA Contractors Guide to Business, Law and Project Management – Tennessee, Pages 7-8 to 7-9
A job cost tracking system composed of a project number, an activity classification code (e.g., CSI MasterFormat), and a distribution code (M=Material, L=Labor, E=Equipment, P=Project Overhead).
Unit Price Method NASCLA Contractors Guide to Business, Law and Project Management – Tennessee, Page 7-7
An estimating approach that bundles all cost factors—labor, materials, equipment, and subcontractors—into a single price per unit of completed work.
Company Overhead Percentage NASCLA Contractors Guide to Business, Law and Project Management – Tennessee, Page 7-6
Calculated by dividing total overhead costs from the prior year by total revenues (both found on the income statement) to express overhead as a percentage of revenue.
Standard Industry Markup NASCLA Contractors Guide to Business, Law and Project Management – Tennessee, Page 7-7
The commonly used cost-based pricing markup of 15% applied to direct project costs (labor, materials, equipment, project overhead, and subcontractors) to cover profit.

Formulas to Know

Labor Cost per TaskRequired Labor Hours per Task × Labor Rate = Labor Cost per Task
Total Material Unit CostPrice per Unit × Number of Units Needed = Total Material Unit Cost
Bid Price from Direct Costs and Overhead %Bid Price = Direct Costs ÷ (1 − Total Overhead %)
Total Overhead PercentageTotal Overhead % = Project Overhead % + Company Overhead %
Company Overhead PercentageCompany Overhead % = Total Overhead Costs (prior year) ÷ Total Revenues (prior year)
Labor Cost with BurdenTotal Labor Cost = Base Labor Cost × (1 + Labor Burden %)
Cost-Based Price with MarkupSell Price = Direct Costs × (1 + Markup %)
Net ProfitNet Profit = Total Revenues − Total Expenses
Start free practice Full study guide