Alabama Business & Law Examination: Your Complete Guide to Passing on Your First Try
If you are applying for an Alabama general contractor license, you have to sit for this exam. It used to be called the General Contractor Examination. Now it's the Business & Law Examination, and the bulletin states this exam is required of all general contractors.
This is not a trade exam. Nobody is going to ask you how to frame a wall or pour footings. This test is about the business side: licensing law, lien deadlines, payroll taxes, contracts, insurance, OSHA records. It's the paperwork side of the job.
The good news is that the test is open book. The bad news is that the book is thick and the clock runs. This guide walks you through what's on the exam, what the questions look like, and how to prepare.
What to Expect on the Alabama Business & Law Exam
The exam is delivered by PSI. Here's what you need to know before you register:
| Questions | 50 questions |
| Time limit | 2 hours |
| Passing score | 70% correct |
| Books in the exam room | Open book |
| Exam fee | $96 |
On exam day
- You must present one valid government-issued photo and signature identification that matches the name used when scheduling.
- You should arrive at least 30 minutes before your appointment.
- Reference books must be otherwise unmarked and may not contain loose or attached additional papers, and references are not supplied at the examination center.
- Books may be highlighted, underlined and indexed and tabbed with permanent tabs only, but may not be written in, and Post-It style temporary tabs must be removed before the exam begins.
- A silent, nonprinting, non-programmable calculator may be used.
- Only approved items may be taken into the examination room, and personal belongings such as electronic devices, purses, reading material, writing devices, food and drinks must be left in secure storage.
References you may bring
- NASCLA Contractors Guide to Business Law and Project Management, Alabama General (3rd edition)
Scheduling, changes and retakes
- You may register and schedule online at PSI's website or by calling PSI at (855) 257-1619.
- All eligibilities are valid for 1 year from the date the application is received by the state, and if you do not pass within that year you must reapply with the state.
- You may cancel and reschedule without forfeiting your fee if your cancellation notice is received 2 days before the scheduled examination date, using the PSI website or by speaking to a PSI representative.
- You forfeit your examination fee and cannot test if you miss the appointment, arrive after the examination start time, fail to cancel 2 days in advance, or do not present proper identification.
- Results are given immediately on screen and emailed, with a diagnostic report of strengths and weaknesses for candidates who do not pass.
- You may take the examination an unlimited number of times during the 1-year period, paying the fee for each registration.
Source: State of Alabama General Contractors Candidate Information Bulletin, Updated 1/23/26. Check the bulletin before test day: fees and rules can change.
Alabama Contractor License Requirements: Topics Covered
The official outline breaks the exam into eleven topics. Study them in order of weight — the heaviest topics are where the points are.
Licensing — 8 items (16%). The biggest single topic. Verified questions here cover the major license classifications (and which ones are not major classifications), the 51% regulation for work falling inside your licensed classification, the dollar threshold at which a general contractor's license is required, how Alabama defines a subcontractor by contract cost, bid limits under the letter classification system, the application fee for a new prime contractor's license, how many members sit on the Alabama Licensing Board for General Contractors, which months the board holds regular quarterly meetings, and which states hold reciprocal agreements with Alabama. If you only have time to master one chapter, make it this one. Know the Alabama general contractor license requirements cold.
Payroll and Taxes — 6 items (12%). Federal and state tax mechanics. Verified questions here cover the FLSA workweek, the wage threshold that triggers state and federal unemployment tax liability, which IRS form reports payments of $600 or more to independent contractors, semiweekly deposit dates, the penalty rate for deposits made 1–5 days late, the deadline for furnishing Form W-2 to employees, and Alabama's corporate income tax rate.
Contracts — 6 items (12%). The four required elements that make a contract binding, who carries the risk for cost overruns under a lump-sum contract, what change orders do, which dispute resolution method produces a legally binding decision, the main advantage of design/build, what belongs in progress payment requirements, and the basic criteria for evaluating subcontractors. One verified question also covers what happens to a disputed, vague provision when the contract can't be clarified by the parties' actions — the interpretation goes against whoever wrote it.
Estimating and Bidding — 5 items (10%). Quantity take-off, what gets added after labor and materials, the difference between project overhead and company overhead, direct versus indirect costs, unit price math, and the definition of bid shopping.
Financial — 5 items (10%). The six steps of the accounting cycle, the balance sheet equation, when income is reported under the completed contract method, which method recognizes income as it's earned, what a high debt ratio means, and retainage math on a progress billing.
Personnel and Labor — 5 items (10%). The FLSA workweek again, Alabama's new hire reporting fine, the civil money penalty for willful minimum wage or overtime violations, hour limits for minors 14 or 15 when school is in session, how long OSHA records must be kept, and the age protected under the ADEA.
Risk Management — 4 items (8%). All-risk versus named peril builders' risk coverage, the four basic requirements in bond language, the Miller Act bonding threshold on federal projects, and the contract value that triggers performance and payment bonds on Alabama public projects.
Safety Recordkeeping and Environmental — 4 items (8%). The three OSHA forms employers with more than 10 employees must maintain, retention periods for exposure records, the workers' compensation premium credit for a drug-free workplace program, the number you call for underground utility locates, and the notification lead time before disturbing regulated asbestos-containing material.
Project Management — 3 items (6%). Critical path method, contingency time, which scheduling method shows interdependent relationships between tasks, and what does and doesn't belong in a daily report.
Liens — 2 items (4%). Small topic, easy points. Filing deadlines by claimant type, the deadline to begin a foreclosure action, what a material supplier can claim with proper written notice, and what must be posted to bond around a lien.
Business Organization — 2 items (4%). Corporation naming rules, what happens to a general partnership when a partner leaves or dies, the shareholder cap on an S Corporation, and which structure is the hybrid.
Sample Alabama General Contractor License Practice Questions
Here are four Alabama general contractor license practice questions straight from our practice bank. Answers aren't printed here on purpose — work them yourself, then try the free practice exam.
1. Licensing
Under the 51% regulation, a general contractor may undertake a project if what percentage of the work falls within their licensed classification?
- A. 51% or more
- B. 25% or more
- C. 75% or more
- D. 40% or more
Tests whether you know the Alabama Licensing Board rule on how much of a project's cost must fall inside your major classification.
2. Payroll and Taxes
What is Alabama's corporate income tax rate?
- A. 4.5%
- B. 5.0%
- C. 6.0%
- D. 6.5%
Tests a straight state tax number.
3. Contracts
When evaluating subcontractors, which factor is NOT mentioned as basic criteria?
- A. Quality of products or services
- B. Reliability and schedule adherence
- C. Company size and number of employees
- D. Proper licensing and insurance coverage
Tests whether you can recognize the listed evaluation criteria — and spot the item that isn't on the list.
4. Estimating and Bidding
Excavate 5,000 cu yd with 25% swell. How many hauled?
- A. 5,500
- B. 6,000
- C. 6,250
- D. 6,500
Tests basic take-off math under time pressure. No book lookup will save you here — just run the numbers.
What Types of Questions to Expect
Our practice questions follow four patterns.
Straight recall. A number, a deadline, a form name, a dollar threshold. How long OSHA records must be kept. The deadline to furnish Form W-2. The contract value that triggers bonding on an Alabama public project. These are pure lookup questions if you know where to look.
NOT questions. "Which of the following is NOT a major classification?" "Which is NOT one of the four required elements?" Three options are on the list and one isn't. Read the whole question. The word NOT is where people get careless and lose easy points.
Definition and concept questions. What is bid shopping. What is contingency time. What is the critical path. Which structure is the hybrid. These reward reading the chapter once with understanding, not memorizing a table.
Calculations. Unit price totals, retainage on a progress billing, percentage of completion, swell on an excavation take-off. Basic arithmetic, but you need to set the problem up right.
Essential Study Materials for Alabama Contractor License Requirements PDF
You don't need a shelf of books. You need one reference and something to mark it with.
- NASCLA Contractors Guide to Business Law and Project Management, Alabama General (3rd edition) — required. This is the book our practice questions cite. Buy the correct Alabama edition, not a generic or out-of-state version.
- Sharpie Tank Highlighters, 12-pack assorted colors — recommended. Chisel tip, bright fluorescent ink, resists smearing. Use a different color per topic so your eye finds the right block on the page fast.
This exam is open book. That changes how you study: you're not memorizing everything, you're building a map. If you're hunting for an "Alabama contractor license requirements pdf" to study from, go to the source instead — the official bulletin and the Alabama Licensing Board for General Contractors website. Register through PSI.
Study Tips for Success
Weight your study time. Licensing, Payroll and Taxes, and Contracts together account for a big share of the exam. Give them the most hours. Liens and Business Organization are small, but they're also short chapters with concrete facts — cheap points if you put in an hour each.
Build your index before exam day. Open book means nothing if you're flipping blind. Go chapter by chapter and mark the pages that hold numbers: thresholds, deadlines, penalties, rates, formulas.
Practice looking things up against a clock. Reading a chapter and finding a fact in 30 seconds are two different skills. Drill the second one.
Watch your pace. You have about 2 minutes 24 seconds per question. Some questions you'll answer from memory in fifteen seconds. Save the leftover time for the lookups. If a question is eating well past your average and you're not close, flag it and move on.
Answer everything. Never leave an item blank.
Use practice to find holes, not to feel good. Every question you miss points at a page you haven't marked yet. Go mark it.
Ready to Get Your Alabama General Contractor License?
Reading the book gets you familiar. Answering questions gets you ready. The gap between those two is where people fail.
Start with our free Alabama Business and Law Exam sampler — 10 questions to see where you stand. When you're ready for the real thing, the full practice exam gives you 50 questions on a 2 hours clock, so you can rehearse the pacing along with the content.
You need 70% correct to pass. Go earn it.
Start your free practice exam now