Free FL Business & Finance Exam Flashcards

A sole proprietor has unlimited personal liability for business debts and lawsuits because the business is not a separate legal entity. Many contractors form an LLC or corporation instead to shield personal assets. (Contractors Manual)

Both separate the owner's personal assets from business debts, but an LLC has simpler pass-through taxation and fewer formalities, while a corporation can issue stock and requires bylaws, officers, and annual meetings. (Contractors Manual)

A usable business plan states the services offered, target market, startup and operating costs, financing sources, and a cash-flow projection — not just a marketing pitch. (Contractors Manual)

Certified general and building contractors must carry at least $300,000 public liability and $50,000 property damage coverage; certified residential contractors and most other categories (including Division II specialty trades) carry at least $100,000 and $25,000. These are licensing minimums, not necessarily enough for every contract. (Rule 61G4-15.003, F.A.C.)

Buying builds equity and locks in a depreciation deduction; leasing preserves cash and shifts obsolescence risk to the lessor. The right choice depends on the asset's useful life and the company's current cash position, not just the monthly payment.

The contractor agrees to a single fixed price for the defined scope of work and keeps the risk of any cost overrun within that scope. The price only changes if a signed change order alters the scope itself — not just because costs ran higher than estimated. (Contractors Manual)

The owner pays the contractor's actual documented costs plus an agreed fee or percentage markup. The owner bears more cost risk, so these contracts usually require open-book cost records and often a guaranteed maximum price cap.

Payment is based on a fixed price per measured unit of work (per square foot, linear foot, or cubic yard) rather than one lump total, which is useful when the exact quantity of work is not known when the contract is signed.

A percentage added to a bid to absorb unforeseen costs such as price volatility or minor scope gaps. Under-pricing contingency is a common way contractors lose money on an otherwise well-estimated job.

Sets the rules bidders must follow to submit a compliant, comparable bid, including the required bid form, bid security, and the deadline and method of submission. It is one of the approved references for this exam. (AIA A701)

A periodic invoice tied to the percentage of work completed to date, typically supported by a schedule of values. Draw requests keep the contractor's cash flow ahead of material and labor costs on a long job.

A percentage of each progress payment the owner withholds until the job reaches substantial completion, giving the owner leverage to ensure the contractor finishes and corrects punch-list items. The percentage and release trigger are set by the contract, not a fixed statutory rate on private jobs.

A written, signed modification to the contract's scope, price, or schedule. Performing extra work without a signed change order is a common way contractors end up doing work they cannot later collect payment for.

A documented, job-specific safety program covering hazard identification, PPE requirements, and emergency procedures that administrative staff maintain and update — not just a poster on the wall. This is separate from OSHA injury recordkeeping.

Administrative staff should track COI expiration dates for the company and every active subcontractor, since a lapsed policy discovered after a loss can leave the general contractor exposed to a claim its subcontractor's coverage should have paid.

A contract clause that ties the subcontractor's payment timing to when the general contractor is paid by the owner. It shifts timing risk downstream but does not eliminate the general contractor's underlying duty to pay for completed work.

The list of minor incomplete or defective items identified at substantial completion that the contractor must correct before final payment and retainage release.

Submittals (shop drawings, product data) confirm materials match the specification before installation; a Request for Information (RFI) documents a question about unclear plans. Both create a paper trail that protects the contractor if a dispute arises later.

The sequence of tasks that determines the shortest possible project duration — delaying any task on the critical path delays the whole job, while delays on other tasks may not, if float (slack) is available.

Employers with 10 or fewer employees at all times in the prior calendar year are generally exempt from routine OSHA 300/301 injury recordkeeping, but every employer, regardless of size, must still report a work-related fatality within 8 hours, and any in-patient hospitalization, amputation, or loss of an eye within 24 hours — by phone or through OSHA's online reporting form. (29 CFR 1904.1; 1904.39)

Materials are scheduled to arrive close to when they are needed on site, reducing storage cost and theft exposure, but increasing exposure to supplier delays compared to stockpiling ahead of a job.

A bid bond guarantees a winning bidder will sign the contract at the bid price; a performance bond guarantees the project gets finished if the contractor defaults; a payment bond guarantees subcontractors and suppliers get paid even if the contractor does not. The owner is the obligee on all three; none protects the contractor, who must reimburse the surety for any claim it pays.

A tagged, logged inventory of tools and equipment (who has it, which job it's assigned to) reduces loss and theft and supports accurate job costing when equipment use is billed back to a specific job.

A report that groups unpaid customer invoices by how long they have been outstanding (0-30, 31-60, 61-90+ days). Contractors use it to spot slow-paying customers before a cash-flow problem develops.

A supplier term like "2/10 net 30" means a 2% discount applies if the invoice is paid within 10 days, otherwise the full amount is due in 30 days. Skipping the discount to hold the cash for the extra 20 days works out to an annualized cost of roughly 37% — usually far more expensive than any short-term financing a contractor could get instead.

Current ratio (current assets divided by current liabilities) measures whether short-term assets cover short-term debts. Quick ratio removes inventory from that calculation for a stricter test, since inventory is the slowest current asset to convert to cash. Both are financial ratios contractors track to manage cash flow.

Tracking labor, material, and equipment cost against a specific job number, separate from overhead. Without job costing, a contractor cannot tell which jobs are actually profitable versus which are subsidized by others.

Indirect costs (office rent, insurance, admin salaries) that cannot be billed to one job are spread across all jobs, usually as a percentage of direct cost or labor hours, so every bid carries its fair share of the company's fixed costs.

Markup is added cost expressed as a percentage of cost; margin is profit expressed as a percentage of the selling price. A 25% markup on a $100 cost prices the job at $125, which is only a 20% margin — the two numbers are never equal above zero.

The volume of work at which total revenue equals total cost (fixed plus variable), so profit is zero. A contractor below break-even is losing money even on jobs that look individually profitable, because fixed overhead isn't fully covered.

Spreads an asset's depreciable cost evenly over its useful life: (cost minus salvage value) divided by useful life equals the same expense each year. It is the simplest depreciation method contractors use for financial statements. (Builder's Guide to Accounting)

Accrual accounting records revenue and expense when earned or incurred, regardless of when cash moves; cash basis records them only when cash actually changes hands. Accrual gives a truer picture of job profitability but is more complex to maintain.

A snapshot at one point in time showing what the business owns (assets), owes (liabilities), and the owner's remaining stake (equity), where assets always equal liabilities plus equity.

Shows revenue minus cost of goods sold (direct job costs) equals gross profit, then minus operating overhead equals net profit, covering a period of time rather than a single date like the balance sheet.

Current assets minus current liabilities. A contractor with too little working capital cannot cover payroll and material bills between owner payments, even if the company is profitable on paper.

Employers withhold 6.2% Social Security (up to the annual wage base) and 1.45% Medicare from employee wages and must match both from company funds — a mandatory payroll cost on top of the wage itself. Employers must also withhold an extra 0.9% Additional Medicare Tax on an employee's wages over $200,000 in a year, whatever the filing status, and do not match it.

FUTA is 6.0% on the first $7,000 of each employee's wages, reduced by a credit of up to 5.4% for paying state unemployment tax on time (often a 0.6% net rate). Florida's reemployment tax applies the same $7,000 wage base at a 2.7% rate for a new employer's first 10 quarters, then an experience-based rate. Both are paid by the employer, not withheld from the employee.

Treating a worker who is supervised, uses company tools, and works set hours as a 1099 independent contractor instead of a W-2 employee can trigger back payroll taxes, penalties, and workers' compensation exposure if the IRS or state reclassifies the worker.

On a lump-sum or time-and-materials contract to improve real property, the contractor pays sales tax when buying materials and does not charge the customer sales tax on the invoice — the contractor is treated as the final consumer of the materials. (Fla. Admin. Code R. 12A-1.051; DOR GT-800067)

Form I-9 verifies a new employee's identity and work eligibility: the employee completes Section 1 by the first day of work, and the employer completes Section 2 within 3 business days of that start date. Form W-4 sets federal income tax withholding. Both are separate from any state E-Verify duty.

A written HR policy set covering attendance, safety rules, disciplinary steps, and harassment reporting gives a contracting business a consistent, defensible standard to apply and reduces the risk of a wrongful-termination or discrimination claim.

A written, periodic review of an employee's job performance creates a paper trail that supports promotion, raise, or termination decisions and helps defend the company if an employment decision is later challenged.

A certified contractor holds a state-issued certificate of competency and may contract anywhere in Florida. A registered contractor instead registers with DBPR after meeting a specific local jurisdiction's competency requirement, and may contract only in that jurisdiction. (§489.105(8),(10), F.S.)

The licensed individual whose license "qualifies" a business to hold a contractor's license. The qualifying agent is personally responsible for supervising the company's construction activities and can face CILB discipline for the business's licensing violations. (Ch. 489, F.S.)

A licensing complaint is investigated by DBPR under Ch. 455, F.S., and if probable cause is found, the case goes to the Construction Industry Licensing Board, which can impose a fine of up to $10,000 per violation, probation, license suspension, or revocation. (§455.225 and §489.129(1), F.S.)

A subcontractor or supplier without a direct contract with the owner must serve a Notice to Owner within 45 days of first furnishing labor or materials, and before the owner's final payment, to preserve lien rights under Florida's construction lien law. (Ch. 713.06, F.S.)

A construction lien claim must be recorded within 90 days of the final furnishing of labor, services, or materials on the job, or the lien right is lost. (Ch. 713.08, F.S.)

Once recorded, a construction lien stays enforceable for only 1 year unless suit to foreclose is filed — and that window shrinks to 60 days after service of the notice if the property owner records a Notice of Contest of Lien. (Ch. 713.22, F.S.)

A construction corporation officer may apply for a workers' comp exemption only with at least 10% ownership, and no more than 3 officers per corporation (or affiliated group) may be exempt at the same time (§440.02(18)(b)2, F.S.; the election is filed under §440.05). Non-exempt employees must still be covered — construction employers need coverage once they have just 1 employee, versus 4 or more for most other industries (§440.02(20)(b)2, F.S.).

Private Florida employers with 25 or more employees, and all public employers, must use E-Verify to confirm new hires' work eligibility and certify compliance on their reemployment tax return. (Fla. Stat. §448.095)