South Carolina Business Management and Law for Residential Builders

SC Residential Builders Licensing Exam Study Brief

Key Concepts

Sole Proprietorship - Simplest form; owner and business are legally the same entity - Unlimited personal liability for all business debts and actions - Business terminates upon owner's death - Net income reported as ordinary income (no corporate tax) - If operating under a name other than your own, file a fictitious name certificate - Advantages: minimal restrictions, low startup costs, sole ownership of profits - Disadvantages: unlimited liability, limited capital, difficulty obtaining long-term financing

Key Concepts

Purpose of Licensing

Licensing protects public health, safety, and welfare by establishing: - Entrance requirements (experience, training, examination) - Standards of practice (workmanship standards, continuing education) - Disciplinary authority (investigations, fines, license revocation)

SC Residential Builders Commission

• 8 members appointed by the Governor with advice and consent of the Senate
• 2 members must be consumers (not engaged in residential building)
• 4 members must have been actively engaged in residential building for at least 5 years prior to appointment; 1 of those 4 must have been in residential specialty contracting for at least 5 years
• 1 member appointed from the state at large
• Terms are 4 years (or until successor is…

Key Concepts

Bid Documents — A complete bid package includes four components: 1. Invitation to bid — project overview, deadlines, general requirements 2. Bid instructions — how to complete and submit the bid 3. Bid forms — bid sheet, bid schedule, bidder's questionnaire, copy of contract 4. Supplements — property survey, soil analysis, other supporting documents

A bidder can be found unresponsive if documents are incorrectly submitted or omitted. If changes occur before bid due date, an addendum is issued — it becomes part of the bid documents and ultimately part of the contract. Always review addenda carefully; they may change your pricing decision or whether you bid at all.

SC Residential Builders Licensing Exam | 14% of Exam (7 Questions)

Key Concepts

Four Required Elements of a Binding Contract

All four must be present or the contract is invalid:

1. Offer and Acceptance — An offer outlines work and compensation (a bid/estimate qualifies as an offer). Acceptance requires both parties to agree to the same terms; a counteroffer is NOT acceptance. Offers expire in 30 days unless stated otherwise; without a deadline, expiration is "reasonable time" (court-determined).
2. Consideration — Both parties must give up something of value (typically services exchanged for money).
3. Competent Parties — Parties must be of sound mind and legal capacity. Contracts with minors (without parental consent), intoxicated, or mentally…

(7 Questions | 14% of Exam)

Key Concepts

Scheduling Process

• Sequence of tasks: Activities must be ordered by dependency (what must finish before the next can start).
• Activity duration: Estimated time to complete each task; based on labor, materials, and scope.
• Contingency time: Buffer added to the schedule to account for unforeseen delays (weather, inspections, delivery issues).
• Float time (slack): The amount of time a task can be delayed without delaying the overall project completion. Tasks on the critical path have zero float.

Key Concepts

Types of Insurance Coverage

Commercial General Liability (CGL): Covers premises-operations, products/completed operations, contractual liability, property damage, bodily injury, and independent contractors. This is the cornerstone policy for residential builders.

Umbrella Policy: Provides excess coverage above the limits of underlying policies (CGL, auto, employer's liability). Activates after primary policy limits are exhausted.

Automobile Insurance: Required by SC law for all owned, non-owned, and rented vehicles. Coverage level set by applicable state law.

Workers' Compensation: Legally required coverage for employee on-the-job injuries. Covers medical expenses and lost wages regardless of fault.

Builders' Risk Insurance: Two forms — named peril (covers only listed risks) and all-risk/open peril (covers all risks except those specifically excluded). Covers structures under construction.

SC Residential Builders Licensing Exam

Key Concepts

The Three OSHA Forms

Form 300 — Log of Work-Related Injuries and Illnesses Running log maintained throughout the year. Records each recordable injury/illness with employee name, job title, date, location, description, and outcome (days away, restricted duty, etc.). Kept confidential — employee names may be withheld for privacy cases (e.g., sexual assaults, mental illness).

Form 300A — Annual Summary Summarizes totals from Form 300 for the calendar year. Must be posted February 1 through April 30 of the following year in a visible workplace location. Must be signed and certified by a company executive. Posted even if zero injuries occurred.

South Carolina Residential Builders Licensing Exam

Key Concepts

Fair Labor Standards Act (FLSA)

• Federal minimum wage: $7.25/hour (South Carolina has no state minimum wage law, so federal rate applies)
• Overtime: 1.5x regular rate for all hours worked over 40 in a workweek
• Applies to most construction employers; exempt employees (salaried executives, administrative, professional) must meet specific salary and duties tests

New Hire Reporting (South Carolina)

• Must report all new and rehired employees to the SC New Hire Reporting System within 20 days of hire/rehire
• Reporting methods: online at newhire.sc.gov, mail, fax to (803) 898-9100, or diskette/tape
• Employers using magnetic/electronic media must report twice per month
• Required data: employer…

Key Concepts

Accounting Methods

• Cash basis: Revenue and expenses recorded when cash is actually received or paid. Simpler, used by smaller contractors.
• Accrual basis: Revenue and expenses recorded when earned or incurred, regardless of cash movement. More accurate for long-term projects.

Contract Accounting Methods

• Completed Contract Method: Revenue and expenses recognized only when the project is 100% complete. Income can be deferred; preferred when project outcome is uncertain.
• Percentage of Completion Method: Revenue recognized proportionally as work progresses (based on costs incurred vs. estimated total costs). More common for long-term residential construction contracts.
• Cost Comparison: Tracks actual costs vs. budgeted costs to monitor job profitability throughout the project.

10% of exam — approximately 5 questions

Key Concepts

Employer Identification Number (EIN)

• Required for any business entity with employees, or any entity other than a sole proprietor with no employees
• Apply via IRS Form SS-4 — can be submitted online (immediate), by phone, fax, or mail
• Free to obtain directly from the IRS; never pay a third party for EIN registration

Federal Employment Taxes

FICA (Federal Insurance Contributions Act) - Social Security: 6.2% employee + 6.2% employer = 12.4% total (wage base limit applies) - Medicare: 1.45% employee + 1.45% employer = 2.9% total (no wage cap) - Employer withholds the employee share and pays both portions to the IRS

Key Concepts

What is a Mechanics' Lien? A mechanics' lien "clouds" the title to real property, preventing the owner from selling with a clear title. It can be foreclosed through a lawsuit, with the court ordering the property sold to pay contractors, subcontractors, laborers, or material suppliers. Critically, an owner can be forced to pay twice — even if they already paid the general contractor. Governed by SC Code of Laws, Title 29, Chapter 5.

Who Can File a Lien? Anyone owed a debt for labor performed or materials furnished and actually used in the erection, alteration, or repair of a building or structure. This includes: - General contractors - Subcontractors and sub-subcontractors - Suppliers - Site work contractors…

Key Concepts

Federal Environmental Laws

• Clean Water Act (CWA): Regulates discharge of pollutants into U.S. waters. Requires NPDES (National Pollutant Discharge Elimination System) permits for stormwater runoff from construction sites. Sites disturbing 1 acre or more must obtain an NPDES permit.
• Clean Air Act: Regulates air emissions; applies to construction through dust, asbestos, and demolition requirements.
• Endangered Species Act (ESA): Prohibits actions that harm federally listed species or their habitats. Can halt or modify construction projects.
• NEPA (National Environmental Policy Act): Requires environmental impact assessments for federal projects or federally funded projects.
• NHPA (National Historic Preservation Act): Requires review of impacts on historic properties before federally involved construction proceeds.