Tennessee Business and Law Examination

A Tennessee contractor operates as a sole proprietorship with no separate legal entity. Which statement best describes the owner's personal liability for business debts and job-site claims?

• AThe owner is liable only up to the contractor license monetary limit
• BThe owner has unlimited personal liability for the business's debts and obligations
• CPersonal assets are automatically shielded once a Board license is issued
• DLiability is limited to the amount of the general liability policy deductible

Which governing document typically sets internal ownership, voting, and management rules for a Tennessee limited liability company?

• ACorporate bylaws filed with the Tennessee Secretary of State
• BAn operating agreement among the members
• CThe Contractor's Affidavit submitted to the Board
• DA NASCLA project manual

Why do many small Tennessee contractors elect S corporation or LLC tax treatment instead of remaining a C corporation?

• AC corporations are prohibited from holding a Board contractor license
• BA C corporation's profits are generally taxed at the entity level and again when distribu…
• COnly C corporations must obtain a federal employer identification number
• DS corporations and LLCs are exempt from Tennessee business tax

Under Rule 0680-01-.02, who may serve as the qualifying agent for a Tennessee corporation seeking a contractor license?

• AAny shareholder, regardless of ownership percentage, without further paperwork
• BOnly the corporation's outside attorney
• CA major stockholder owning at least 20 percent of the stock, or a full-time employee with…
• DAny part-time bookkeeper who has sat for the Business and Law exam

A Tennessee LLC's qualifying agent resigns. Under Rule 0680-01-.02, what must the company do?

• ANotify the Board within 10 days and appoint a new qualifying agent who takes the examinat…
• BContinue bidding for 12 months under the departed agent's exam scores
• CFile only an amended Secretary of State annual report; no Board notice is required
• DAutomatically convert to a sole proprietorship license in the remaining member's name

A licensed Tennessee partnership incorporates. Under Rule 0680-01-.09, how long does the entity have to apply for the new mode of operation, and what work may it perform in the meantime?

• A30 days, and it may immediately bid new work in the corporate name
• B90 days to apply; it may finish existing contracts if the application is timely, but it m…
• COne year, with no restriction on new bidding
• DNo application is required if the same qualifying agent stays in place

A Tennessee contractor wants to do business as "Ridgeline Builders" rather than the legal LLC name on the Board license. Which statement is correct?

• AThe contractor may bid under any trade name so long as invoices use the legal name
• BThe full DBA must appear on the Secretary of State certificate and on Board application f…
• CA DBA automatically transfers the Board license to the trade name
• DOnly residential BC-A contractors may use a DBA

Two Tennessee licensees want to bid a USD 2,400,000 plant as a joint venture. Licensee A has a BC-C limit of USD 1,500,000 and Licensee B has a CMC limit of USD 1,200,000. Under Rule 0680-01-.11, when is the joint venture allowed?

• ANever, because joint ventures are prohibited in Tennessee
• BOnly if each firm is licensed in a classification that is a necessary part of the project…
• CWhenever the two monetary limits added together exceed the total project price, even if o…
• DOnly if both firms hold unlimited licenses

In Tennessee, a prime contractor generally must hold a Board contractor license before bidding, offering to engage, or negotiating a price when the project cost is:

• AUSD 10,000 or more
• BUSD 25,000 or more, including labor and materials
• CUSD 50,000 or more, labor only
• DUSD 100,000 or more

A masonry subcontractor will furnish labor and materials directly to a Tennessee prime contractor. When must that mason hold a Board license?

• AWhen the masonry portion is USD 25,000 or more
• BWhen the masonry portion is USD 100,000 or more
• COnly when the overall prime contract exceeds USD 1,000,000
• DNever, because only primes are licensed in Tennessee

What is the Tennessee Board for Licensing Contractors initial application fee for a new contractor license filed at core.tn.gov?

• AUSD 53
• BUSD 100
• CUSD 200
• DUSD 250

Which statement correctly describes the Tennessee Contractor Business and Law examination administered by Prov beginning July 1, 2026?

• A50 questions, 2.5 hours, 73 percent passing, USD 53, open book, typically valid 2 years
• B100 questions, 5 hours, 70 percent passing, USD 250, closed book
• C40 questions, 1 hour, 75 percent passing, no fee, oral only
• D50 questions, 4 hours, 80 percent passing, USD 53, closed book

A new Tennessee applicant shows working capital of USD 12,000 and net worth of USD 40,000, with no plant-and-equipment deficiency. What monetary limit does Rule 0680-01-.13 generally produce?

• AUSD 120,000
• BUSD 400,000
• CUSD 520,000
• DUnlimited

A Tennessee BC-B licensee has a USD 500,000 monetary limit. Which bid is allowed under the 10 percent tolerance in Rule 0680-01-.13?

• AA USD 540,000 bid, because 10 percent tolerance applies to BC-B
• BA USD 600,000 bid, because any 20 percent overrun is tolerated
• CA USD 550,000 bid by a BC-A/r licensee using the same tolerance
• DNo bid above USD 500,000 is ever allowed

Beginning July 1, 2026, a Tennessee applicant who does not want to file a CPA-reviewed or CPA-audited financial statement may instead submit the Board's Contractors' Surety Bond. What minimum bond amount is required?

• AUSD 10,000 regardless of the requested limit
• B25 percent of the requested monetary limit
• CAt least 50 percent of the requested monetary limit
• D100 percent of working capital only

Under Tenn. Code Ann. § 62-6-119, which information must appear on the outside of a Tennessee bid envelope (or in the electronic bid) for the prime contractor?

• AOnly the bid price and a notarized affidavit
• BThe prime's name, license number, expiration date, and license classification
• CThe qualifying agent's Social Security number and home address
• DA complete CPA financial statement

A Tennessee licensee holds BC-B with a USD 800,000 limit and CE with a USD 400,000 limit. The firm wants to bid a USD 1,100,000 mixed building-and-electrical project by adding the two limits. Is that permitted?

• AYes, because multiple classifications on one license are always additive
• BYes, if the electrical portion is less than USD 400,000
• CNo. Rule 0680-01-.13 states that different classification limits on the same license shal…
• DYes, because the 10 percent tolerance on USD 800,000 covers the gap

A contractor required to be licensed under Tenn. Code Ann. Title 62, Chapter 6 violates the licensing laws, including by exceeding the monetary limit. What recovery does § 62-6-103(b) allow in court?

• AFull contract price plus punitive damages
• BLost profits calculated on the bid markup
• COnly actual documented expenses shown by clear and convincing proof
• DQuantum meruit for the reasonable value of the completed work, including profit

In construction estimating, which costs are typically classified as direct job costs?

• AHome-office rent, officer salaries, and annual software subscriptions
• BOn-site labor, materials incorporated into the work, equipment used on the job, and subco…
• CFederal income tax and owner draws
• DUnallocated contingency held at the company level

After bids are opened, a Tennessee prime contractor shows Subcontractor A's price to Subcontractor B and asks B to beat it. What practice is that?

• ABid shopping
• BBid peddling
• CA legitimate addendum
• DA responsive-bid correction

On a public Tennessee bid, what is the difference between a responsive bid and a responsible bidder?

• AResponsive means the bidder has enough money; responsible means the forms are complete
• BResponsive means the bid complies with the bid documents; responsible means the bidder ha…
• CThe two terms are interchangeable under Board rules
• DResponsible refers only to the bid bond amount

A bid bond on a public project is most often written for what amount?

• A1 percent of the bid
• B5 to 10 percent of the bid
• C50 percent of the bid
• D100 percent of the bid

A Tennessee estimator has total job cost of USD 80,000 and wants a 20 percent profit margin on the selling price. What bid price is required?

• AUSD 84,000
• BUSD 96,000
• CUSD 100,000
• DUSD 120,000

A change order adds USD 20,000 of direct cost. The contract allows 15 percent overhead on direct cost and 10 percent profit on the sum of direct cost plus overhead. What is the change-order price?

• AUSD 23,000
• BUSD 25,000
• CUSD 25,300
• DUSD 27,000

A takeoff shows 2,400 square feet of brick veneer. The estimator adds 7 percent waste and prices brick at USD 12.50 per square foot installed. What is the brick line-item cost?

• AUSD 30,000
• BUSD 32,100
• CUSD 33,600
• DUSD 36,000

A Tennessee prime is bidding a school with USD 180,000 of electrical, USD 90,000 of plumbing, USD 70,000 of HVAC, and USD 140,000 of masonry. Under Tenn. Code Ann. § 62-6-119 and Rule 0680-01-.24, which listing is required on the bid envelope?

• AOnly the prime, because specialty listings are optional
• BOne licensed electrical contractor, one plumbing contractor, one HVAC contractor, and one…
• CEvery subcontractor of any trade, including painting and flooring
• DThe electrical contractor only, because that trade is the largest

An unlicensed firm submits the low bid on a Tennessee project that requires a license. Under Rule 0680-01-.18, what happens?

• AThe firm may be awarded the job if it applies for a license within 10 days
• BThe firm shall not be awarded the contract and shall not participate in any re-bidding of…
• CThe owner must hire the firm as a construction manager
• DThe bid is automatically assigned to the next licensed bidder at the unlicensed price

Which contract pricing method pays a stated price per measured unit of completed work, so the final contract amount varies with actual installed quantities?

• ALump-sum (stipulated-sum) contract
• BUnit-price contract
• CCost-plus-fixed-fee contract
• DGuaranteed-maximum-price contract with no unit schedule

An addendum issued two days before bid opening changes the specified rooftop units. A bidder does not acknowledge the addendum. What is the usual result?

• AThe bid remains fully responsive because addenda are optional reading
• BThe bid is typically nonresponsive and may be rejected
• CThe owner must rewrite the specification after award
• DThe bidder may ignore the addendum and install the original units

Direct costs are USD 200,000. Overhead is 15 percent of direct cost. Profit is 10 percent of the sum of direct cost plus overhead. What is the bid?

• AUSD 230,000
• BUSD 250,000
• CUSD 253,000
• DUSD 255,556

A Tennessee BC-A licensee has a USD 350,000 monetary limit and is not BC-A/r. The complete bid, including overhead and profit, is USD 382,000. May the firm submit the bid?

• AYes, because USD 382,000 is within the 10 percent tolerance of USD 350,000
• BNo, because overhead and profit are added on top of the monetary limit
• CNo, because USD 382,000 exceeds the USD 385,000 ceiling created by the 10 percent toleran…
• DYes, because residential work has no monetary limit

A reviewed statement shows current assets of USD 90,000, including USD 22,000 of accounts receivable of which USD 7,000 is more than 3 months overdue, and current liabilities of USD 40,000. Net worth is USD 70,000. There is no plant deficiency. What monetary limit does Rule 0680-01-.13 generally support?

• AUSD 430,000
• BUSD 500,000
• CUSD 700,000
• DUSD 900,000

Which four elements are required to form an enforceable construction contract?

• AOffer, acceptance, consideration, and legal capacity and purpose
• BA bid bond, a notary seal, a building permit, and a Board interview
• CA handshake, a start date, a punch list, and retainage
• DAn estimate, an addendum, a schedule of values, and a lien waiver

Under the Statute of Frauds, which agreement generally must be in writing to be enforceable?

• AA one-day equipment rental for USD 200
• BA contract for the sale of an interest in real property, or a construction contract that…
• CAn oral agreement to sweep a job trailer
• DA cash purchase of nails from a lumberyard