Florida Business and Finance Exam (Construction Contractors)

Key Concepts

Business Organizational Structures

• Sole Proprietorship: Simplest form; owner has unlimited personal liability; no separation between business and personal assets; taxed as personal income.
• Partnership (General): All partners share unlimited liability; income passes through to personal returns; dissolves upon partner death or withdrawal unless agreement states otherwise.
• Limited Partnership: General partners manage and hold full liability; limited partners have liability capped at their investment.
• Corporation (C-Corp): Separate legal entity; shareholders have limited liability; subject to double taxation (corporate + dividend level); officers and directors have fiduciary duties to shareholders (duty of care, duty of loyalty).
• S-Corporation: Pass-through taxation (avoids double taxation); limited to 100 shareholders; must be U.S. citizens/residents.
• LLC: Combines limited liability of a corporation with pass-through taxation of a partnership; flexible management structure.
• Open vs. Closed Corporation: Open (public) corporations trade shares freely; closed (closely held) corporations restrict share transfers, typically to a small group.

Qualifying Agents (Florida-Specific)

• Under Florida law, every contractor business entity must have a qualifying agent who holds the license and is responsible for all work performed.
• The qualifying agent has full personal liability for work performed under the license, including code compliance and financial responsibility.
• A qualifier can serve as primary qualifying agent (one business only) or secondary qualifying agent (multiple businesses with board approval).
• If the qualifying agent leaves, the…

Key Concepts

Business Development

• Staffing availability drives market selection — don't bid work you lack the labor or subs to perform.
• Income sources include direct contracts, subcontract work, service/repair, and design-build. Market share is tracked by comparing your revenue to total available market volume.

Business Overhead Categories

Fixed overhead (constant regardless of volume): rent, salaries, telephone, utilities, depreciation, insurance, interest, advertising. Variable overhead (fluctuates with sales volume): payroll taxes, equipment rental, union welfare, automotive expenses, bad debts.

Payroll Tax Obligations: - FICA (Social Security): 6.2% employer + 6.2% employee on wages up to annual wage base - Medicare: 1.45% employer + 1.45% employee (no wage cap) - FUTA (Federal Unemployment): 6.0% on first $7,000 per employee; credit up to 5.4% if SUTA paid → effective rate often 0.6% - SUTA (State Unemployment): Rate varies by employer experience rating in Florida - Workers' Comp: Rate per $100 of payroll, varies by job classification code

Contracts and Bidding

• Valid contract requires: Offer, acceptance, consideration, capacity, and lawful purpose.
• Statute of Frauds: Construction contracts over $1 and involving real property improvements must be in writing to be enforceable. Sale of goods over $500 must be in writing under the UCC.
• AIA A201 — General Conditions of the Contract for Construction (governs rights/duties of owner, contractor, architect).
• AIA A701 — Instructions to Bidders (governs bid procedures, bid…

Key Concepts

Scheduling Trade Operations (CPM, RFI, Submittals)

• Critical Path Method (CPM): Identifies the longest sequence of dependent tasks that determines minimum project duration. Any delay on the critical path delays the entire project. Float exists on non-critical paths only.
• Submittal/Approval/Fabrication Process: Allow lead time for shop drawing submission → contractor review → architect approval → fabrication → delivery. Failure to account for long-lead items (structural steel, custom equipment) causes schedule delays.
• RFIs (Requests for Information): Used to clarify design documents. Track RFIs carefully — unanswered RFIs can become the basis for delay claims.
• Sequencing trades: Rough mechanical/electrical/plumbing before insulation and drywall. Exterior envelope before interior finishes. Foundation → framing → MEP rough-in → inspections → finishes.

AIA A201 – Shop Drawings, Submittals, and Product Data

• Under AIA A201, the contractor must review and approve all submittals (shop drawings, product data, samples) before forwarding to the architect. Contractor's review stamp certifies conformance with contract documents.
• The architect's approval does not relieve the contractor of responsibility for errors, omissions, or deviations from contract documents.
• Submittals must be submitted with reasonable promptness to avoid delaying the project.

Key Concepts

Accounting Methods

• Percentage-of-Completion (POC): Recognize income proportional to work completed. Required for contractors with large jobs in progress at year-end. Income = (% complete × contract price); overbilled amounts are "Billings in Excess of Costs" (a liability); underbilled amounts are "Costs in Excess of Billings" (an asset).
• Completed-Contract Method: Income recognized only when the contract is fully complete. Allowed for smaller jobs or short-duration contracts. Defers all income and expenses until project completion.

Revenue Recognition Terms

• Billings in Excess of Costs: You billed more than you've earned → liability on balance sheet.
• Costs in Excess of Billings: You've earned more than you've billed → asset on balance sheet.
• Retainage: A percentage (typically 10%) withheld by the owner until project completion. Recorded as a receivable; not income until earned and released.

Florida Lien Law (Accounts Receivable/Payable)

• Florida's Construction Lien Law (Chapter 713, F.S.) protects contractors, subcontractors, and suppliers.
• Notice to Owner (NTO): Must be served by subcontractors and suppliers within 45 days of first furnishing labor/materials.
• Claim of Lien: Must be recorded within 90 days of last furnishing labor/materials.
• Suit to enforce lien: Must be filed within 1 year of recording the claim of lien.
• Proper lien compliance directly affects accounts receivable collectability.

Key Concepts

Hiring & Anti-Discrimination Laws

• Title VII (Civil Rights Act of 1964): Prohibits discrimination based on race, color, religion, sex, or national origin. Applies to employers with 15+ employees.
• ADEA (Age Discrimination in Employment Act): Protects workers 40 and older; applies to employers with 20+ employees.
• ADA (Americans with Disabilities Act): Requires reasonable accommodation; applies to employers with 15+ employees.
• Florida Civil Rights Act of 1992: Mirrors federal law but applies to employers with 15+ employees in Florida.
• Equal Pay Act (EPA): Prohibits wage differentials based on sex for equal work in the same establishment.
• Required new-hire forms: W-4, I-9 (employment eligibility verification), and Florida New Hire Reporting form.

FLSA – Wage & Hour

• Federal minimum wage: $7.25/hr. Florida minimum wage (2025): $13.00/hr (Florida rate controls when higher).
• Overtime: 1.5× the regular rate of pay for all hours over 40 in a workweek.
• Each workweek stands alone — hours cannot be averaged across weeks.
• Regular rate of pay includes all remuneration except: discretionary bonuses, gifts, profit-sharing contributions, overtime premium pay itself, and expense reimbursements.

Key Concepts

Chapter 489, Part I — Construction Contracting

• Governs licensing of contractors in Florida. The Construction Industry Licensing Board (CILB) operates under DBPR and enforces contractor standards.
• Contractors must hold a valid license before contracting; unlicensed activity is a first-degree misdemeanor (or felony for repeat offenses).
• License categories: Certified (statewide) vs. Registered (local jurisdiction only).
• Contractors are responsible for work performed by their subcontractors and must ensure subs carry proper workers' compensation coverage.

Chapter 455 — Business & Professional Regulation

• "Department" = Department of Business and Professional Regulation (DBPR).
• "License" includes permits, registrations, certificates, and licenses issued by DBPR.
• §455.225: Disciplinary proceedings — complaints are reviewed by a probable cause panel before formal charges are filed. Panels are composed of board members.
• §455.227: Grounds for discipline include fraud, deceit, negligence, incompetence, and violating any provision of applicable statutes or rules.
• §455.228: Unlicensed practice = civil penalty up to $5,000 per incident; DBPR may issue cease and desist orders.
• §455.271: Licenses may be placed on inactive or delinquent status; delinquent licenses cannot be used to practice.
• §455.2123: Continuing education (CE) is required for license renewal; providers must be approved by DBPR.