Tennessee - Business and Law Management Exam

Key Concepts

The $25,000 Rule (Definition of Contracting) A contractor license is required whenever the cost of a project is $25,000 or more. This applies to: - Any single project bid or contracted directly to the owner at $25,000+ - Subcontractors performing electrical, mechanical, plumbing, or HVAC work at $25,000+ - Construction management of any kind where project value exceeds $25,000

"Contracting" is broadly defined — it includes performing, supervising, scheduling, directing, bidding, offering a price, or in any way assuming charge of construction, alteration, repair, demolition, or improvement. If it costs $25,000 or more, you need a license.

Licensing Application Process (8 Steps) 1. Pass the business & law exam AND applicable trade exam (through PSI Services LLC, 1-800-733-9267) 2. Gather required documentation (experience, financials) 3. Complete the application synopsis — list minimum 3 years' experience, sign and notarize affidavit 4. Attach proof of workers' compensation insurance and general liability insurance 5. Submit…

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Bid Documents A complete bid package includes: (1) invitation to bid, (2) bid instructions, (3) bid forms (bid sheet, bid schedule, bidder's questionnaire, copy of contract), and (4) supplements (property survey, soil analysis). Failure to submit documents correctly or completely renders the bidder unresponsive. Subcontractors must provide a copy of their license to the prime contractor to be correctly listed on the bid envelope (Rule 0680-1-24).

Licensing & Bidding - Bidding without a license causes bid rejection — you cannot rebid (T.C.A. 62-6-120) - Bidding before license approval results in issuance being held for six months (T.C.A. 62-6-120)

Addenda Any changes to a bid package before the due date are issued as an addendum. Addenda become part of the bid documents and ultimately part of the contract. Always evaluate how addenda affect your pricing or your decision to bid.

Tennessee Business & Law Management Exam — 14% of Exam (7 Questions)

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Business Entity Types

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Employer Identification Number (EIN) - EIN is a 9-digit number (format: 00-0000000) issued by the IRS to identify tax accounts - Who does NOT need an EIN: Sole proprietors with no employees who file no excise or pension tax returns; single-member LLCs where the owner files employment tax returns (these entities use their SSN instead) - All other entities — including partnerships — must obtain an EIN - How to apply: online at irs.gov, phone (1-800-829-4933), fax Form SS-4, or mail Form SS-4

Federal Tax Forms by Entity Type - Sole Proprietor: Form 1040 + Schedule C (income), Schedule SE (self-employment tax), 1040-ES (estimated tax), Form 941 (payroll), Form 940 (FUTA) - Partnership: Form 1065 (information return only — partnerships do NOT pay income tax directly); individual partners use 1040 + Schedule E and Schedule SE - Corporation: Form 1120 or 1120-A; S-Corporation uses Form 1120S; shareholders use 1040 + Schedule E…

(5 Questions, 10% of Exam)

Key Concepts

Workers' Compensation

• Tennessee requires most construction employers to carry workers' compensation insurance.
• Exemptions are available for certain sole proprietors, partners, and LLC members — but they must actively register for the exemption; it is not automatic.
• The Workers' Compensation Exemption Registry requires an application; exemptions can be revoked for non-compliance and must be reinstated through a formal process.

New Hire Reporting

• Report all new/rehired employees to the Tennessee New Hire Reporting Program:
• Within 16 days if reporting electronically
• Within 20 days if reporting manually
• Reporting methods: online at newhire-reporting.com/TN-Newhire, diskette, magnetic tape, fax (1-877-505-4761), or phone (1-888-715-2280).
• Penalties: $20.00 per incident for failure to report; up to $500.00 if conspiracy to avoid reporting is found.
• Purpose: Enforce child support orders; detect fraud in unemployment, workers' comp, and government programs.

Tennessee Business and Law Management Exam | 6 Questions | 12% of Exam

Key Concepts

Tennessee Mechanics' and Materialmen's Lien Law (TCA 66-11-101)

Who Can File a Lien: - Prime Contractor (Direct Lienor): Has a direct contract with the property owner - Remote Contractor (Indirect Lienor): Subcontractors, sub-subcontractors, material suppliers — anyone without a direct contract with the owner

Property Type Distinctions Matter: - Commercial property: Broader lien rights; fewer notice requirements for prime contractors - Residential owner-occupied property: Remote contractors must provide a Notice of Nonpayment to protect lien rights; stricter procedural requirements apply

Filing Deadlines

Key Concepts

Required Elements of a Binding Contract

All four elements must be present or the contract is invalid: - Offer and Acceptance – An offer outlines work and compensation; acceptance is agreement to terms (typically by signing). A counteroffer is NOT acceptance. Default offer expiration is 30 days (or "reasonable time" if unstated — court-determined). - Consideration – Both parties must exchange something of value (typically services for money). - Competent Parties – Parties must have legal capacity: no minors without parental consent, no one mentally incapacitated or under heavy influence of drugs/alcohol. - Legal Purpose – Work must be legal, possible to perform, and not harmful (e.g., a contract requiring code-violating construction is void).

Key Concepts

Insurance Basics Insurance is a contract (policy) where one party indemnifies another against specified loss in return for premiums. The less coverage you carry, the more risk you assume. Policies must specify: policy term, coverage, premiums, and deductibles.

Types of Insurance Coverage - Property Insurance: Covers buildings, equipment, furniture, inventory, machinery, computers, leased equipment, and vehicles. Can be specific-peril or broad-based (fire, theft, vandalism, acts of God). - All-Risk Builders' Risk: Covers property owners and builders for buildings under construction. Covers machinery, equipment, materials, supplies, and fixtures becoming part of the structure. Does NOT cover: major construction defects, poor workmanship, faulty design, or contractor's tools (get separate coverage). Construction must be in progress for coverage to exist. - Commercial General Liability (CGL): Covers premises-operations, products/completed operations, contractual liability, property damage, independent contractors, and bodily injury. Umbrella policies provide excess coverage above CGL limits. - Automobile Liability: Must cover owned, non-owned, and rented…

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OSHA Standards & Framework

• OSHA established by the Occupational Safety and Health Act of 1970
• Tennessee adopted Tennessee Occupational Safety and Health Act of 1972 (Title 50, Chapter 3) — TOSHA enforces state standards, which must be at least as strict as federal standards
• Key federal standards for construction:
• 29 CFR 1926 – Safety and Health Regulations for Construction
• 29 CFR 1910 – General Industry Safety and Health Standards
• 29 CFR 1904 – Recording and Reporting Occupational Injuries and Illnesses
• OSHA poster must be posted in a prominent location; on construction sites, must be posted at the location employees report to each day