Tennessee Business and Law Management Exam

Exam: Tennessee Business and Law Management Exam

Subtopics: Liability and taxation differences across business structures

Key Concepts

Sole proprietorships (Page 2-1, Key Characteristics) - Existence: You own the assets of the company. Selling the business is in actuality selling the assets; you close out your business license and the buyer obtains all appropriate licenses and accounts in his or her own name. A sole proprietorship is terminated upon the owner's death. - Financial Management: Business and personal expenses must be separated and careful records kept, because the IRS may question the handling of these funds and you may be asked to provide documentation. - Liability: You bear personal liability for all actions undertaken in the name of the business. - Taxes: Net income from the business…

Key Concepts

The $25,000 threshold and who is a "contractor." A "contractor" is any person or entity that undertakes, attempts, or bids/offers to construct, supervise, superintend, oversee, schedule, direct or assume charge of construction work "for which the total cost is twenty-five thousand dollars ($25,000) or more"; for a licensed masonry contractor the term covers the masonry portion "the total cost of which exceeds one hundred thousand dollars ($100,000), materials and labor" (§ 62-6-102(4)(A)(i), App. E, p. E-1). "Contractor" includes prime, electrical, mechanical, plumbing and masonry contractors and subcontractors, plus a roofing subcontractor where the roofing portion is $25,000 or more (§ 62-6-102(4)(A)(ii)), and construction managers, consultants, architects or engineers performing other than normal architectural and engineering services when the project exceeds $25,000 (§ 62-6-102(4)(A)(iii)). It…

Key Concepts

• Bid package contents — an invitation to bid (overview, deadlines, general requirements), bid instructions, bid forms (bid sheet, bid schedule, bidder's questionnaire, copy of the contract), and supplements (e.g., property survey, soil analysis). (Page 7-1, Bid Documents)
• Unresponsive bidder — a bidder can be found unresponsive if information is incorrectly submitted or omitted altogether from the bid package. (Page 7-1)
• Pre-bid meetings are scheduled especially for larger projects; project specifications and any changes to the bid package are discussed. (Bid Documents section)
• Addendum — when changes are made to a bid package before it is due, an addendum is issued; it becomes part of the bid documents and, ultimately, part of the contract when awarded. (Page 7-2)
• **Ethics in…

Key Concepts

Required contract elements — Four elements make a contract binding: offer and acceptance, consideration, competent parties, and legal purpose (Ch. 8, Required Contract Elements).

• Offer and acceptance — A bid or estimate you submit is an offer. Acceptance means agreeing to the offer as made, generally by signing it. A counteroffer is not acceptance; acceptance occurs only when both parties agree to the contract terms (Ch. 8, Offer and Acceptance). An offer typically allows 30 days for acceptance, but the time frame should be stated; if no deadline is given, it expires in a "reasonable time," subject to court interpretation.
• Negotiation — Parties are not bound to contract terms until an offer is made and acceptance achieved, so be clear when a…

Topic: Project Management Primary source: NASCLA Contractors Guide to Business, Law and Project Management – Tennessee, Chapter 9 (Scheduling and Project Management) and Chapter 8 (Contract Management)

Key Concepts

Scheduling process elements (Ch. 9 — Scheduling Process; Final Inspection): the scheduling process determines sequence of tasks, activity duration, contingency time, task time ranges, and float time. Project start and completion dates are outlined in the contract; the scheduler fits all necessary tasks into that time frame.

• Sequence of tasks — some tasks run at the same time, others must precede the next task (interior and exterior paint can be applied at the same time; drywall must be completed before paint).
• Activity duration depends on size of the project, labor hours estimated, and length of…

Key Concepts

Insurance fundamentals - Indemnity is "a way to transfer risk and exemption from loss incurred by any course of action." An insurance payout is sometimes called an indemnity. (Managing Risk — Insurance section) - All-risk builders' risk covers direct loss by perils not specifically excluded, generally covering almost all risks (theft, vandalism, accidental losses, damage/destruction). Construction must be in progress for coverage to exist. Major construction defects (poor workmanship, faulty design) and your tools are generally not covered. (Managing Risk — Insurance) - Named peril builders' risk has narrower coverage and specifies what perils are covered — typically fire and lightning. (Managing Risk — Insurance) - Subrogation clause (generally in the builders' risk policy): the insurance company pays the insured for damage or loss…

Key Concepts

Safety standards (Chapter 12 — Safety Standards). Three OSHA standards apply to construction: 29 CFR 1926 (Safety and Health Regulations for the Construction Industry), 29 CFR 1910 (Occupational Safety and Health Standards), and 29 CFR 1904 (Recording and Reporting Occupational Injuries and Illnesses). All employers must post the OSHA poster; in construction it goes at the location to which employees report each day.

Recordkeeping (Chapter 12 — OSHA Recordkeeping). Every OSHA-covered employer with more than 10 employees, except certain low-hazard retail, finance, insurance, real estate and service employers, must keep records. Forms are kept five years following the year to which they pertain. Form 300A must be conspicuously posted by February 1 and kept in place until at least April 30 following the year…

NASCLA Contractors Guide, Tennessee (4th ed.), Chapter 14 — Financial Management

Key Concepts

The accounting cycle (Chapter 14 — Financial Management): (1) classify and record transactions, (2) post transactions, (3) prepare a trial balance, (4) prepare an adjusted trial balance, (5) prepare financial statements, (6) analyze financial statements.

Journals (Classify and Record Transactions section): the general journal is used for non-cash transactions; the cash receipts and sales journal is used when cash comes in or a sale is charged; the purchases journal tracks all purchases; the cash disbursements journal is used when cash is paid out; the payroll journal records a summary of payroll details.

Key Concepts

Workers' compensation — who pays and who must carry it - Workers' compensation insurance is purchased by the employer; no part of it should be paid for by employees or deducted from their pay (Ch. 11 — Workers' Compensation, opening statement). - All construction services providers must carry workers' compensation insurance on themselves, "whether or not the provider employs fewer than five (5) employees" (§50-6-902(a), Appendix G). - Penalty for failing to maintain current coverage: up to 2.5 times the average yearly workers' compensation premium; an injunction may also be sought to close the business (Ch. 11 — Workers' Compensation). - Corporate officers may be excluded from coverage by filing Form I-6, Corporate Officer Election Not to Accept provisions of workers' compensation, with the…

Tennessee Business and Law Management Exam — Tax Laws

Key Concepts

Employer Identification Number (EIN) — The EIN is a 9-digit number the IRS issues, arranged as 00-0000000. It identifies the tax accounts of employers and certain others who have no employees. The only entities that do not need an EIN are sole proprietorships with no employees that file no excise or pension tax returns, and single-owner LLCs (where the owner will file employment tax returns); those owners use their social security number. All other entities, including partnerships, must obtain an EIN. Obtain one by calling the Business and Specialty Tax Line at 1-800-829-4933, faxing or mailing Form SS-4, or applying online at www.irs.gov. (Tax Basics — Employer Identification Number section, Page 15-1)

Key Concepts

Definitions (TCA 66-11-101; NASCLA Ch. 16 "Important Terminology") - Visible commencement of operations: the first actual work of improving upon the land, or the first delivery to the site of materials which remain thereon until actually incorporated in the improvement, of such manifest and substantial character as to notify interested persons that an improvement is being made or is about to be made. - Per TCA 66-11-101(16) (and 66-11-104(a)), it excludes demolition, surveying, excavating, clearing, filling or grading, placement of sewer or drainage lines or other utility lines or work preparatory therefor, erection of temporary security fencing, and delivery of materials therefor. - Prime contractor = in direct privity of contract with the owner or owner's agent; remote contractor = contracts with a person…