Free TN Contractor Business and Law (new licensees only) Practice Questions

Sample Practice Questions

Try these 10 sample questions from the TN Contractor Business and Law (new licensees only) practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1A Tennessee contractor entity is applying for its license. In what name and organizational form must the license be issued?

   1. A. The exact name and mode of operation shown on its financial statement
   2. B. Any assumed name registered after the license is issued
   3. C. The qualifying agent's personal name in every case
   4. D. The shortest trade name used on bids

   Answer: A

   Explanation: The Board instructs that the financial statement be prepared in the “exact name and mode of operation to be licensed.” Therefore the license application must use that same entity name and form.

   Reference: Contractor — Step 2: Financial Statement; exact licensed entity name and mode of operation

2. 2Who may serve as qualifying agent for a Tennessee contractor licensed as a sole proprietorship?

   1. A. Any outside consultant with a notarized contract
   2. B. The owner or a full-time employee with power of attorney
   3. C. Only a CPA who prepared the financial statement
   4. D. Any licensed subcontractor on the first project

   Answer: B

   Explanation: Rule 0680-01-.02(4)(a) identifies “either the individual owner or full-time employee with a written power of attorney” as eligible for a sole proprietorship, so B is correct.

   Reference: Tn Rules 0680 01 (2022) — Rules link → Chapter 0680-01, Rule 0680-01-.02(4)(a)

3. 3What general bid tolerance applies above a Tennessee contractor's monetary limit?

   1. A. 10 percent
   2. B. 5 percent
   3. C. 15 percent
   4. D. 20 percent

   Answer: A

   Explanation: The Board’s monetary-limit guidance states, “There is a 10% tolerance for the monetary limit,” subject to the BC-A/r exception. Therefore A is correct.

   Reference: Contractor — Step 2: Monetary Limit; Rule 0680-01-.13(6)

4. 4Under TDOT's manual, which project document is the written Department-contractor agreement, with surety assent, that modifies the contract?

   1. A. Change Order
   2. B. Force Account
   3. C. Time Impact Analysis
   4. D. Baseline Schedule

   Answer: A

   Explanation: The manual defines a Change Order as “A written agreement entered into by and between the Department and the Contractor, with the written assent of the Surety.” Among the named project documents, A is that instrument.

   Reference: Author: JJ03537 — Change Order Manual § Change Order definition, page 3

5. 5A contractor project manager receives a fully executed TDOT change order. What recordkeeping action follows?

   1. A. Destroy the pricing backup
   2. B. Send only the signature page to the supplier
   3. C. Replace the original contract file
   4. D. Save the executed change order with support documents in the contract folder

   Answer: D

   Explanation: After execution, the project recordkeeping step is to “save a copy of the Change Order with support documents in the contract folder in CMS.” A contractor project manager must retain and route the complete executed package, so D is correct.

   Reference: Author: JJ03537 — TDOT Policy 355-01 and Circular Letter 203-01.03

6. 6Under OSHA's construction rules, what distinguishes a competent person?

   1. A. The ability to identify hazards and authority to correct them promptly
   2. B. Ten years of trade experience regardless of authority
   3. C. A professional-engineer license in every case
   4. D. Appointment by the project owner only

   Answer: A

   Explanation: OSHA defines a competent person as one “capable of identifying existing and predictable hazards” and having authority to correct them promptly. Therefore A is correct.

   Reference: 1926.32 - Definitions. | Occupational Safety and Health Administration — 1926.32(f)

7. 7Which three categories does a balance sheet track?

   1. A. Revenue, bids, and change orders
   2. B. Labor, materials, and equipment
   3. C. Assets, liabilities, and equity
   4. D. Sales tax, use tax, and payroll tax

   Answer: C

   Explanation: SBA guidance says a balance sheet helps a business “track assets, liabilities, and equity.” Therefore C is correct.

   Reference: Sba Manage Finances — Manage Your Finances § Start with a balance sheet

8. 8For a construction enterprise with at least two employees, what annual gross-volume threshold generally triggers FLSA enterprise coverage?

   1. A. $500,000
   2. B. $50,000
   3. C. $750,000
   4. D. $1,500,000

   Answer: A

   Explanation: DOL states that a construction business with at least two employees and “an annual gross sales volume of $500,000 or more” is subject to FLSA enterprise coverage. Therefore A is correct.

   Reference: Fact Sheet #1: The Construction Industry Under the Fair Labor Standards Act (FLSA) | U.S. Department of Labor — Coverage; 29 U.S.C. § 203(s)(1)(A)(ii)

9. 9A contractor maintains payroll and employment-tax records. How long must those federal tax records generally be kept?

   1. A. One year
   2. B. Two years
   3. C. Three years
   4. D. At least four years

   Answer: D

   Explanation: For the contractor’s payroll records, the regulation requires maintenance “for at least four years after the due date of such tax” or the later payment date. Therefore D is correct; employment-tax recordkeeping falls within the exam’s Financial Management scope.

   Reference: eCFR :: 26 CFR 31.6001-1 -- Records in general. — 26 CFR 31.6001-1(e), records of employers

10. 10What lien rule applies to Tennessee state public-construction property?

    1. A. Mechanics' liens attach after 90 days
    2. B. Only material suppliers may assert mechanics' liens
    3. C. A lien attaches only above $25,000
    4. D. State public-construction property is not subject to mechanics' liens

    Answer: D

    Explanation: The State's contract conditions state, “Public construction projects are not subject to mechanics’ liens in Tennessee.” Claimants instead look to the required contract bond.

    Reference: Tn A201 Contract — Section 2.1.2