Establishing the Contracting Business
11%of exam
Managing Administrative Duties
26%of exam
Managing Trade Operations
10%of exam
Conducting Accounting Functions
32%of exam
Managing Human Resources
6%of exam
Complying with Government Regulations
15%of exam
Quick Facts
- Exam
- Business & Finance
- Body
- Florida CILB
- Questions
- 120 questions
- Time
- 6.5 hours
- Pass
- 70% not rounded
- Format
- Open-book CBT
- Retest
- Every 21 days
- 4-Year Rule
- Scores void after
Contractor Insurance Minimums
300/50 general&building, 100/25 the rest
General: $300k/$50kBuilding: $300k/$50kResidential: $100k/$25kSpecialty: $100k/$25k
Business Structure & Team
- Sole Proprietorship
- Unlimited personal liability exposure
- LLC
- Pass-through tax, few formalities
- Corporation
- Stock, bylaws, officers required
- Partnership
- Shared liability and control
- Business Plan
- Services, market, costs, financing
- Buy vs Lease
- Builds equity vs preserves cash
- Accountant
- Books and tax specialist
- Attorney
- Contracts and lien specialist
- Insurance Agent
- Coverage types and limits
- Bonding Agent
- Underwrites contractor surety bonds
Liability Insurance Minimums
- General Contractor
- $300,000 liability, $50,000 property
- Building Contractor
- $300,000 liability, $50,000 property
- Residential Contractor
- $100,000 liability, $25,000 property
- Specialty (Division II)
- $100,000 liability, $25,000 property
- Proof of Coverage
- Signed affidavit; random Board audits
Lump-Sum vs Cost-Plus
Lump-Sum
- One fixed total price
- Contractor keeps overrun risk
- Change order is only exception
Cost-Plus
- Actual cost plus a fee
- Owner carries more cost risk
- Often capped by a GMP
Who carries the cost risk
Contract Type Picker
- Scope is fully defined→Lump-Sum(Contractor keeps overrun risk)
- Owner wants open-book costs→Cost-Plus(Add a price cap)
- Exact quantities not yet known→Unit-Price(Pay per measured unit)
- Need general conditions text→AIA A201(2017 edition, ref R5)
- Need a subcontract form→AIA A401(2017 edition, ref R6)
- Need bidder instructions→AIA A701(2018 edition, ref R7)
- Need a full bid package→A701 + A201 + A401(Instructions, conditions, subcontract)
Contract Types
- Lump-Sum
- Fixed price, contractor keeps risk
- Cost-Plus
- Actual cost plus agreed fee
- Unit-Price
- Price per measured work unit
- GMP
- Cost-plus with a price cap
Bid Bond vs Performance Bond
Bid Bond
- Guarantees signing at bid price
- Used before contract award
- Protects against bid withdrawal
Performance Bond
- Guarantees the job gets finished
- Used during construction itself
- Protects against contractor default
Before award vs during job
Reference Book Picker
- Need Ch. 455 licensing text→Bring Chapter 455, R1(Approved reference R1)
- Need accounting formulas fast→Builder's Guide to Accounting(2001 edition, ref R37)
- Need trade practice guidance→Contractors Manual, R50(2025 edition after Feb 2026)
- Candidate speaks another language→Bring one translation dictionary(Word-for-word or phrase only)
- Need bid, sub, or GC forms→AIA A701, A401, or A201(Reference numbers R7, R6, R5)
Bid & Payment Documents
- Bid Bond
- Guarantees signing at bid price
- Performance Bond
- Guarantees the job gets finished
- Payment Bond
- Guarantees subs and suppliers paid
- Retainage
- Withheld until substantial completion
- Change Order
- Signed change to scope or price
- Punch List
- Minor items before final payment
- Draw Request
- Invoice tied to work completed
- Bid Contingency
- Cushion added for unforeseen costs
AIA Contract Documents
- A201
- General conditions of the contract
- A401
- Contractor-subcontractor standard agreement form
- A701
- Rules for submitting a compliant bid
- Reference List
- Six titles, valid all 2026
Overhead Cost Components
- FICA
- Payroll tax on wages
- FUTA/SUTA
- Unemployment tax on wages
- Workers' Comp
- Injury insurance required cost
- Advertising & Dues
- Marketing and membership overhead
- Loan Financing
- Interest expense on borrowed money
Safety & Insurance Admin
- Written Safety Plan
- Covers hazards, PPE, emergencies
- COI Tracking
- Tracks sub insurance expiration dates
- SDS Sheets
- Chemical hazard safety information
- Drug Testing Policy
- Part of the safety program
- Pay-When-Paid Clause
- Shifts payment timing downstream only
Scheduling & Field Operations
- Critical Path
- Longest task sequence in schedule
- Float (Slack)
- Delay allowed without impact
- RFI
- Documents a question about plans
- Submittal
- Confirms materials match specification
- Just-in-Time
- Materials arrive close to need
OSHA & Inventory Records
- OSHA 300/301
- Routine injury recordkeeping forms
- 10-Employee Rule
- Exempts routine OSHA recordkeeping
- 8-Hour Report
- Any work-related employee fatality
- 24-Hour Report
- Hospitalization, amputation, or eye loss
- Tool Inventory
- Tagged log by job number
Markup vs Margin
Markup on cost, margin on price
25% markup = $125 priceThat's only 20% marginMargin always less than markup
Markup vs Margin
Markup
- % of cost
- Added on top of cost
- 25% markup = $125 price
Margin
- % of price
- Profit as share of price
- Same deal is 20% margin
Cost base vs price base
Financial Statements
- Balance Sheet
- Assets equal liabilities plus equity
- Income Statement
- Revenue minus costs equals profit
- Working Capital
- Current assets minus current liabilities
- Current Ratio
- Current assets divided by liabilities
- Quick Ratio
- Current assets less inventory, ÷ liabilities
Payroll Tax Split
FICA both pay, FUTA employer only
FICA: 6.2%+1.45% each sideFUTA: 6.0% employer, $7k wageFL SUTA: 2.7% new employer
Accrual vs Cash Basis
Accrual
- Records when earned or incurred
- Truer view of job profit
- More complex to maintain
Cash Basis
- Records only when cash moves
- Simpler bookkeeping to maintain
- Less accurate job-profit view
Timing of when it counts
Cost & Pricing Concepts
- Job Costing
- Tracks cost by job number
- Overhead Recovery
- Spreads indirect cost across jobs
- Markup
- Added cost as % of cost
- Margin
- Profit as % of price
- Break-Even
- Revenue equals total cost point
Current Ratio vs Quick Ratio
Current Ratio
- Current assets over liabilities
- Includes inventory value
- Broader liquidity measure
Quick Ratio
- Removes inventory from assets
- Stricter liquidity measure used
- Faster assets convert to cash
Broad test vs strict test
Depreciation & Basis
- Straight-Line
- (Cost minus salvage) / life
- Salvage Value
- Asset's value at end
- Useful Life
- Depreciation time period used
- Accrual Basis
- Records when earned or incurred
- Cash Basis
- Records only when cash moves
AR & AP Management
- AR Aging
- Groups invoices by days outstanding
- Early-Payment Discount
- 2/10 net 30 terms
- Skipped Discount Cost
- About 37% annualized rate
- Lien Rights
- Protect unpaid receivables legally
Payroll & Tax Compliance
- FICA Split
- 6.2% Social Security, 1.45% Medicare
- Additional Medicare Tax
- 0.9% over $200,000 wages
- FUTA
- 6.0% on first $7,000
- FL Reemployment Tax
- 2.7% new-employer rate
- 1099 vs W-2
- Misclassification risks back taxes
- Sales Tax Rule
- Contractor pays as final consumer
- Form I-9
- Verifies work eligibility timing
- Form W-4
- Sets federal income withholding
- E-Verify Mandate
- Private employers with 25+ staff
HR Practices
- Employee Handbook
- Written HR policy standard
- Performance Evaluation
- Documented periodic review record
- I-9 Section 1
- Employee completes by day one
- I-9 Section 2
- Employer completes within 3 days
- Background Check
- Pre-hire eligibility screening step
Lien Law Deadlines
45 notice, 90 claim, 1yr foreclose
45 days: Notice to Owner90 days: record claim of lien1 year: file foreclosure suit60 days: after Notice of Contest
Certified vs Registered Contractor
Certified
- Works statewide
- State-issued certificate of competency
- Any jurisdiction in Florida
Registered
- Works one jurisdiction only
- Meets local competency requirement
- Registers after local approval
Statewide scope vs local scope
Lien Protection Steps
- First furnish labor or material→Serve Notice to Owner(Within 45 days)
- Job is finally furnished→Record a claim of lien(Within 90 days)
- Lien recorded, no suit yet→File suit to foreclose(Within 1 year)
- Owner records Notice of Contest→Foreclose within 60 days(Faster deadline applies now)
- GC delays paying a sub→Check pay-when-paid clause(Shifts timing, not duty)
Licensing Law Basics
- Certified Contractor
- Licensed to work statewide
- Registered Contractor
- Licensed in one jurisdiction
- Qualifying Agent
- Personally liable for violations
- CILB Fine Cap
- $10,000 per violation max
- Business Org Fine
- Extra $5,000 per violation
Notice to Owner vs Claim of Lien
Notice to Owner
- 45-day deadline to serve
- Warns owner, doesn't create lien
- Required before final payment
Claim of Lien
- 90-day deadline to record
- Creates the enforceable lien itself
- Recorded in county records
Warning notice vs the lien
Lien Law Deadlines
- Notice to Owner
- 45 days, before final payment
- Claim of Lien
- Recorded within 90 days
- Lien Foreclosure
- 1 year unless suit filed
- Notice of Contest
- Cuts window to 60 days
Workers' Comp & Employment
- Officer Exemption
- 10% ownership, max 3 officers
- Construction Coverage
- Required at 1+ employees
- Other Industries
- Required at 4+ employees
- E-Verify Threshold
- 25+ private employees, all public
Common Traps
Certified vs Registered Scope
Certified works anywhere statewide ≠ Registered works one jurisdiction only
Markup vs Margin Math
Markup is a % of cost ≠ Margin is a % of price
Notice vs Claim of Lien
Notice only warns of a lien ≠ Claim of lien is the lien
Overrun vs Change Order
Cost overrun stays contractor risk ≠ Change order changes the price
FICA vs FUTA Payer
FICA splits between employer, employee ≠ FUTA is employer-paid only
1099 vs W-2 Test
Employee follows set hours, supervision ≠ Contractor controls how work gets done
Officer Exemption Limits
Needs at least 10% ownership ≠ Max three officers exempt at once
Last Minute
- 1.Pass at 70%, never rounded up
- 2.120 questions in 6.5 hours
- 3.Open book: six approved references only
- 4.One word-for-word translation dictionary allowed
- 5.NTO 45 days, before final payment
- 6.Lien claim: 90 days post-furnishing
- 7.Foreclose within 1 year, unless contested
- 8.Contested lien: only 60 days left
- 9.Officer exemption needs 10%, max 3
- 10.Construction needs comp at 1 employee
- 11.E-Verify required: private employers with 25+
- 12.CILB fines cap at $10,000 each
- 13.Retest cycle: every 21 days
- 14.All parts void after 4 years
Third-party resources · We may earn a commission from purchases.
General or Residential Florida Contractor's Exam Study Guide 2026-2027: Comprehensive Resource with Strategic Approach + 5 Full-Length Practice Tests ... Business, Finance and Construction Methods
By M. Hashley, Robert
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