Business Organization and Licensing practice

All 13 free business organization and licensing questions

1. Which project best fits the statutory description of a general engineering contractor's principal contracting business?

   • A A levee and river control project Correct
   • B A 40-unit apartment building
   • C A drywall, paint and flooring job
   • D A single-trade re-roof on a house

   Section 7056 of the Business and Professions Code defines a general engineering contractor by fixed works requiring specialized engineering knowledge and skill, and it names levees and river control works. The test is the kind of work, so job size does not move a building into that branch.

   Bus. & Prof. Code s. 7056

2. A licensed sole owner sells her contracting business, including its trade name and customer list. What may happen to her contractor license?

   • A It transfers with the registrar's approval
   • B It transfers once the buyer qualifies
   • C It cannot be transferred at all Correct
   • D It transfers with the trade name

   Section 7075.1 of the Business and Professions Code states that no license, whatever its type or classification, is transferable to any other person or entity under any circumstances, so buying a licensed business never buys the license.

   Bus. & Prof. Code s. 7075.1(a)

3. A responsible managing employee counts as actively engaged in the applicant's business only when working how much?

   • A 20 hours weekly, or 50 percent if lower
   • B 32 hours weekly, or 80 percent if lower Correct
   • C 32 hours weekly, or 80 percent if higher
   • D 40 hours weekly, or 80 percent if lower

   Section 7068 of the Business and Professions Code defines actively engaged as 32 hours per week, or 80 percent of the hours the business operates, whichever is less. Because the lesser figure governs, a business open 30 hours a week needs 24 hours.

   Bus. & Prof. Code s. 7068(c)(2)(B)

4. In any one-year period, one qualifying individual may serve as qualifier for at most how many separate firms?

   • A Two firms in the period
   • B Three firms in the period Correct
   • C Four firms in the period
   • D No limit under common ownership

   Section 7068.1 of the Business and Professions Code, as amended effective January 1, 2025, caps a qualifying individual at no more than three firms in any one-year period, and that ceiling holds even where the common ownership, subsidiary or same-majority conditions are met.

   Bus. & Prof. Code s. 7068.1(b)

5. Before the board can check an applicant's criminal history, what must that applicant furnish with the contractor's license application?

   • A A full set of fingerprints Correct
   • B A sworn statement of prior convictions
   • C A clearance letter from the Department of Justice
   • D A notarized character reference from a licensee

   Section 7069 of the Business and Professions Code requires the board to have every applicant furnish a full set of fingerprints for a criminal history record check, and the board uses them to obtain records from state and federal authorities.

   Bus. & Prof. Code s. 7069(b)

6. In what sum must an applicant or licensee file the contractor's bond the board requires before it issues or renews a license?

   • A A bond of $12,500
   • B A bond of $15,000
   • C A bond of $25,000 Correct
   • D A bond of $100,000

   Section 7071.6 of the Business and Professions Code requires a contractor's bond of $25,000 as a condition precedent to issuing, reinstating, reactivating, renewing or maintaining a license. The $100,000 bond is the separate wage bond a limited liability company licensee carries.

   Bus. & Prof. Code s. 7071.6(a)

7. A limited liability company holding a contractor's license must file a surety bond for employees damaged by unpaid wages. In what amount?

   • A A bond of $15,000
   • B A bond of $25,000
   • C A bond of $100,000 Correct
   • D A bond of $1,000,000

   Section 7071.6.5 of the Business and Professions Code requires a limited liability company licensee to have a $100,000 surety bond on file for employees damaged by unpaid wages, interest or fringe benefits. It sits on top of the $25,000 contractor's bond rather than replacing it.

   Bus. & Prof. Code s. 7071.6.5(a)

8. Under the Contractors State License Law, when does a contractor's license issued by the board expire?

   • A One year from the issuing month's end
   • B Two years from the exact issue date
   • C Two years from the issuing month's end Correct
   • D Four years from the issuing month's end

   Section 7140 of the Business and Professions Code provides that a license expires two years from the last day of the month in which it was issued, or two years from the date the renewed license last expired. The term is measured to the end of that month.

   Bus. & Prof. Code s. 7140

9. A licensee renews a contractor's license after it has already expired. How is the delinquency fee calculated?

   • A 25% of the renewal fee
   • B 50% of the renewal fee Correct
   • C 75% of the renewal fee
   • D A flat fee set by regulation

   Section 7137 of the Business and Professions Code, as amended effective January 1, 2026, sets the delinquency fee at 50 percent of the renewal fee where the license is renewed after expiration. Because it is a percentage, it moves with the renewal fee that applies.

   Bus. & Prof. Code s. 7137(a)(5)

10. Where does the Contractors State License Law require a licensee to display the contractor license?

    • A Every jobsite where work is performed
    • B The main office or chief place of business Correct
    • C Every vehicle used in the business
    • D The office of the local building department

    Section 7075 of the Business and Professions Code requires the license to be displayed in the licensee's main office or chief place of business, so the duty attaches to one place rather than to each jobsite.

    Bus. & Prof. Code s. 7075

11. Under the Contractors State License Law, which of the following on its own makes a person a contractor?

    • A Furnishing materials without installing them
    • B Advertising small work as unlicensed
    • C Submitting a bid to construct Correct
    • D Working for wages as an employee

    Section 7026 of the Business and Professions Code makes a person a contractor by submitting a bid, offering to undertake the work, or claiming the capacity to undertake it, so an unlicensed bid breaks the law before any work starts.

    Bus. & Prof. Code s. 7026

12. How much experience must an applicant for a contractor license show in the class applied for, and over what period?

    • A Two years within the last five
    • B Four years within the last four
    • C Four years within the last 10 Correct
    • D Six years within the last 10

    The board's rule requires not less than four years of experience as a journeyman, foreman, supervising employee or contractor in the class applied for, gained within the 10 years immediately preceding the application, so trainee time outside that window does not count.

    16 CCR s. 825(a)

13. Within what time must a licensee notify the registrar in writing of a change to recorded information, such as a business address?

    • A Within 10 days of the change
    • B Within 30 days of the change
    • C Within 90 days of the change Correct
    • D At the next license renewal

    Section 7083 of the Business and Professions Code requires a licensee to notify the registrar in writing, on the prescribed form, within 90 days of any change to information recorded under the chapter. A late notice takes effect only when received.

    Bus. & Prof. Code s. 7083(a)