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CSLB

CSLB Law & Business examination

CSLB contractor license exam practice, done properly.

A 6-part Law & Business study system, an unlimited-retake question pool, and six timed practice tests for the CSLB exam every contractor-license applicant must pass — free forever, no account or payment required to start.

Always freeContent reviewed July 25, 2026Not affiliated with CSLB

What this exam is

The Law & Business examination is the exam every CSLB contractor-license applicant must pass, regardless of trade classification — it is separate from the trade-specific exam (electrical, plumbing, and so on). It is a computer-based, multiple-choice exam administered by CSLB’s testing vendor. Question counts, time limits, fees, and the passing score are all set by CSLB and can change, so this page never states them as a fixed fact — see the official-source box at the bottom of this page.

What's on the exam

The Law & Business exam draws from six subject areas. Each links to its full study section below.

Part 1

Licensing & the CSLB

  • The minor-work exemption and its three edges
  • Class A, B, B-2, and the C specialty alphabet
  • The four-year qualifying-individual rule and RMO/RME
  • The application path: exam, bond, workers' comp

Part 2

Business Organization & Management

  • Sole proprietorship, partnership, corporation, and LLC trade-offs
  • Fictitious business name (DBA) filing requirements
  • Business plans, org charts, and delegation versus responsibility
  • The five contractor-killers

Part 3

Business Finances, Estimating & Bidding

  • Assets, liabilities, and equity; gross versus net profit
  • Working capital, the current ratio, and cash-flow projections
  • Job costing and labor burden
  • Markup versus margin and the omitted-scope error

Part 4

Employment & Labor

  • The employee presumption and the unlicensed-worker rule
  • Daily and weekly overtime, meal and rest periods
  • Trust-fund payroll taxes and I-9 verification
  • Workers' compensation and the SB 216 universal-coverage phase-in

Part 5

Insurance, Bonds & Mechanics Liens

  • CGL, builder's risk, and the 'your work' exclusion
  • Bid, performance, payment, and disciplinary bonds
  • The 20-day preliminary notice
  • 60/30-day and 90-day lien-recording deadlines

Part 6

Contracts, Home Improvement & Public Works

  • Offer, acceptance, and written change orders
  • The home improvement contract's required contents
  • The $1,000-or-10%-whichever-is-less down payment cap
  • Cancellation windows and the Right to Repair Act

The study system

Read every part below right on this page, then drill the same material as multiple-choice practice — free and unlimited.

Part 1 of 6

Licensing & the CSLB

The minor-work threshold, the classification system (A/B/B-2/C), who qualifies as a licensee, and how CSLB disciplines and tracks a license.

The license line

Any construction work priced above the minor-work threshold requires a license, measured as the whole project's labor and materials combined — not per invoice or per trade. Splitting one job into small invoices doesn't shrink it, unlicensed advertising above the threshold is barred, and permit-required work is never exempt regardless of price. Unlicensed contracting is a crime, and an unlicensed contractor cannot sue to collect payment — the customer can even sue to disgorge money already paid, regardless of work quality.

Classifications and the qualifying individual

Class A covers engineered fixed works; Class B covers building projects with two or more unrelated trades; Class B-2 covers multi-trade residential remodels excluding structural work; Class C is the specialty-trade alphabet (C-10 electrical, C-36 plumbing, and so on). Every license rests on a qualifying individual with four years of journey-level experience within the last ten, verified by someone in a position to know. The qualifier — sole owner, Responsible Managing Officer, or Responsible Managing Employee — must exercise direct supervision and control; lending a name without real oversight is license renting, a disciplinable offense for both the qualifier and the business.

The application path and keeping the license

Getting licensed means certified experience, passing both a trade exam and the Law & Business exam, filing a contractor bond, and carrying workers' compensation insurance as required. Licenses renew every two years. CSLB enforcement runs on a ladder from citations to accusations seeking suspension or revocation, plus automatic no-hearing suspensions for triggers like an unpaid civil judgment or a lapsed bond. Business changes — address, personnel, a departed qualifier — must be reported within the statutory window, and entity changes (sole proprietor to corporation, for example) require a new license.

Part 2 of 6

Business Organization & Management

Choosing a business entity, fictitious business names, the management documents that run a contractor, and the decisions that kill contracting businesses.

Choosing the entity

A sole proprietorship is simple but exposes personal assets to every business debt. A general partnership adds mutual agency — each partner can bind the partnership and is personally liable for its obligations. A corporation shields shareholders' personal assets but faces double taxation in its classic C form (an S election trades that for pass-through taxation) and can have its veil pierced by commingled funds or ignored formalities. An LLC pairs a liability shield with pass-through taxation but carries a contractor-specific surcharge: an additional $100,000 employee/worker bond and higher liability-insurance minimums.

Names, management documents, and delegation

A business name that doesn't show the owner's surname, or that implies additional owners, must file and publish a fictitious business name statement. Management questions on the exam test which document answers which problem: a business plan for lenders, an organizational chart for conflicting instructions, job descriptions for unassigned tasks, and a policy manual as both operating rules and the employer's best documentary defense in disputes. Authority can be delegated, but responsibility cannot be shed — the owner who delegates purchasing still answers for what gets committed.

The five contractor-killers

The exam consistently tests the same failure list: underbidding and unpriced risk, overexpansion on thin working capital, missing job cost records, informal contracts and change orders, and key-person dependence. The deliberate risk-management sequence is identify, then transfer, reduce, or accept each risk on purpose — never by default.

Part 3 of 6

Business Finances, Estimating & Bidding

The balance sheet and income statement, working capital and the receivables gap, job costing, estimate anatomy, and the rules that give a bid legal teeth.

The two financial statements

The balance sheet is a snapshot: assets equal liabilities plus owner's equity. The income statement is a movie across a period: revenue minus direct job costs equals gross profit, and gross profit minus overhead equals net profit — healthy gross profit with vanishing net profit signals an overhead problem, not a production problem. Working capital is current assets minus current liabilities, and the receivables gap — weekly payroll and net-30 suppliers against slow, retention-reduced progress payments — is why contractors with full order books still go broke.

Job costing and estimating

Job cost records assign every dollar to the job that consumed it, catching overruns while a job still runs and calibrating the next bid. Labor burden — payroll taxes, workers' comp, and benefits — stacks well above the bare wage, so estimating at bare wages is self-inflicted underbidding. An estimate's anatomy runs direct costs, overhead allocation, contingency, and a deliberately chosen profit. A 25% markup on cost produces only a 20% margin on price — markup and margin are not the same number.

Bidding with legal consequences

A bid becomes contract pricing on acceptance; only a genuine, promptly noticed clerical error offers narrow relief. Public works run on sealed bids to the lowest responsible bidder, with bid bonds and the Subletting and Subcontracting Fair Practices Act barring post-award bid shopping (hawking a listed sub's price around) or bid peddling. The financing matching rule closes the section: never finance long-lived assets with short-term money, and never finance payroll with equipment loans.

Part 4 of 6

Employment & Labor

Worker classification, California's daily-overtime and meal-period rules, the payroll tax alphabet, workers' compensation, and Cal/OSHA jobsite safety.

Classification and pay rules

California presumes a worker is an employee unless the hirer proves otherwise, and a worker performing license-required work without a license is an employee as a matter of law regardless of any signed contract. Overtime pays time-and-a-half after 8 hours in a day or 40 in a week, and double time after 12 in a day — the daily trigger is the rule out-of-state employers miss. Missed meal or rest periods cost one added hour of premium pay each, and final wages are due immediately on discharge, within 72 hours on a quit without notice.

Payroll taxes and workers' compensation

Withheld employee taxes are trust-fund taxes — responsible individuals stay personally liable for withheld-but-unremitted amounts regardless of the business entity. Workers' compensation is a no-fault bargain: benefits regardless of fault in exchange for the exclusive-remedy rule against tort suits. SB 216 phased in mandatory coverage regardless of employee count for C-8, C-20, C-22, and D-49 in 2023, with universal coverage for all licensees now set for January 1, 2028 (as extended by SB 1455) — 'I have no employees' is a shrinking exemption, not a permanent one.

Jobsite safety

Every California employer must maintain a written, effective Injury and Illness Prevention Program (IIPP) — the state's most-cited, and therefore most-tested, safety standard. Cal/OSHA requires a permit for trenches and excavations 5 feet or deeper that workers enter, with protective systems and competent-person inspections. Serious injuries, illnesses, and deaths must be reported to Cal/OSHA immediately, and employees are protected from retaliation for refusing genuinely hazardous work.

Part 5 of 6

Insurance, Bonds & Mechanics Liens

Matching a loss to the right insurance policy, the bond family, and the deadline-driven mechanics-lien machinery that gets subcontractors and suppliers paid.

Matching the loss to the policy

Commercial general liability covers third-party bodily injury and property damage from operations, but never the contractor's own defective work — that's the 'your work' exclusion — or employee injuries, which workers' compensation covers instead. Builder's risk covers the unfinished project itself; a certificate of insurance is only proof, while an additional-insured endorsement is what actually extends coverage to a GC or owner.

The bond family and mechanics liens

A bond is a three-party guarantee, not insurance — the surety pays the obligee, then collects back from the principal. Bid, performance, payment, and disciplinary bonds each guarantee a different promise. Subcontractors and suppliers must serve a preliminary notice within 20 days of first furnishing labor or materials to preserve full lien rights. Recording deadlines run 60 days for the direct contractor and 30 days for everyone else after a Notice of Completion, or 90 days from actual completion if none is recorded — and a recorded lien dies unless a foreclosure action is filed within 90 days of recording.

Releases and diversion

A conditional lien release takes effect only when payment actually clears; signing an unconditional release before a check clears is a classic, costly mistake. On public works, mechanics liens cannot attach to public property, so a payment bond and a stop payment notice against project funds substitute. Diverting one job's progress payment to float another job or personal expenses is a disciplinable offense, and in wrongful configurations a crime.

Part 6 of 6

Contracts, Home Improvement & Public Works

Contract fundamentals, the heavily regulated home improvement contract, the Right to Repair Act, public-works rules, and the dispute-resolution ladder.

Contract fundamentals and the home improvement contract

A contract needs offer, acceptance, consideration, capacity, and lawful purpose; a counteroffer kills the original offer. Home improvement contracts must be written, signed by both parties, and delivered to the owner before work starts, listing the license number, price, dates, payment schedule, and statutory notices. The two most-tested numbers: the down payment cannot exceed $1,000 or 10% of the contract price, whichever is less, and progress payments can never get ahead of the value of work actually performed and materials actually delivered.

Cancellation rights and the Right to Repair Act

Owners may cancel a home improvement contract within three business days of signing, five business days for seniors 65 and older in specified configurations, and seven days when the contract follows a declared disaster. New residential construction lives under the Right to Repair Act, which requires the builder get notice and a chance to inspect and repair before litigation, with a general 10-year outside limit for latent defects.

Public works and resolving disputes

Public-works contractors must pay the DIR-determined prevailing wage, submit certified payroll, and register separately with the Department of Industrial Relations in addition to holding a CSLB license — with statutory apprentice-to-journeyman ratios and no mechanics liens against public property. The exam's preferred dispute ladder runs documentation, then negotiation, then mediation, then arbitration, then litigation — with CSLB's own citation and arbitration machinery available alongside the courts.

Sample questions from the practice pool

Real questions pulled from the imported 101PD question pool — the same pool used inside the free-practice player. Expand any question to see the answer and explanation.

1. Al, unlicensed, agrees to repair a gate for $300 — no permit needed, no helpers. His status:
  • A. Illegal — all construction needs a license
  • B. Within the minor-work exemption — small, permit-free, no employees ✓
  • C. Legal only with city approval

The exemption covers exactly this: the small single job under the threshold with its conditions met. (Book §1.1)

2. Bo, unlicensed, bids a $4,000 fence as five separate $800 'phases' billed weekly. The law sees:
  • A. Five legal small jobs
  • B. One $4,000 project requiring a license — splitting invoices never shrinks the job ✓
  • C. A clever tax strategy

The threshold measures the project, labor and materials combined; paperwork games don't move the line. (Book §1.1)

3. Cy, unlicensed, runs an online ad: 'Kitchen remodels, best prices.' Even before taking any job he has:
  • A. Done nothing — ads are free speech
  • B. Violated the law — unlicensed persons may not advertise for work above the threshold ✓
  • C. Violated only if he uses photos

Advertising as a contractor is itself regulated; sub-threshold ads must disclose unlicensed status. (Book §1.1)

4. A homeowner refuses to pay unlicensed Dan $18,000 for a flawlessly built deck. In court, Dan:
  • A. Wins — the work was perfect
  • B. Cannot sue to collect, and the homeowner can claw back anything already paid ✓
  • C. Wins half under quantum meruit

The no-suit/disgorgement rule ignores quality entirely; the license is the whole ballgame. (Book §1.1)

5. After a declared wildfire disaster, unlicensed Ed solicits rebuild work in the burn zone. His exposure is:
  • A. The same as anywhere
  • B. Elevated — disaster-area unlicensed contracting carries enhanced (felony-exposure) penalties ✓
  • C. Nothing if victims sign waivers

The enhanced penalties were written precisely for post-disaster predation. (Book §1.1)

6. A ground-up custom home involving framing, plumbing, electrical, and roofing is the signature project of a:
  • A. Class A — General Engineering
  • B. Class B — General Building ✓
  • C. Class C-61 specialist

Structures for support/shelter/enclosure with two or more unrelated trades = Class B territory. (Book §1.2)

7. A highway interchange with engineered grading and bridge work belongs to:
  • A. Class A — General Engineering ✓
  • B. Class B — General Building
  • C. Any licensee who bids lowest

Fixed works requiring specialized engineering knowledge are the Class A definition. (Book §1.2)

8. A B contractor is offered a roof-replacement-only job. Without holding C-39 he should:
  • A. Take it — B covers everything
  • B. Decline or sub it — single-trade jobs belong to the specialty classification ✓
  • C. Take it if under $10,000

B's power comes from the two-or-more-unrelated-trades rule; single-trade work is the C specialist's lane. (Book §1.2)

Start practicing freeRead the FAQ first

6 independent timed practice tests are also available — start with practice test 1.

Common questions

Before you start practicing

Is this the official CSLB Law & Business examination?

Practice tests — not official CSLB exams. Not affiliated with the Contractors State License Board or any government agency. Always confirm current test rules at cslb.ca.gov.

Do I need an account to start practicing?

No. Every sample question on this page is free to read with no account. Creating a free 101PD account only saves your progress and score history across the six numbered practice tests.

Does this cover the trade exam too (electrical, plumbing, and so on)?

No — this course covers the Law & Business examination every classification applicant must pass. The separate trade exam (for your specific classification) is not covered here.

How many questions are on the real exam, and what's the passing score?

Question counts and passing standards are set by CSLB and its testing vendor and can change, so we do not print a fixed number here. Check cslb.ca.gov for the current format before you schedule your exam.

Can I retake a practice test if I don't pass?

Yes. Each of the six numbered practice tests immediately offers a second, independently drawn version if you don't pass the first, and the full study-part question pool stays free and unlimited.

Do 101PD practice tests show the correct answer and why?

Yes. Every question shows whether you were right and a plain-English explanation with a study-part citation, so a missed question becomes a learning moment instead of a dead end.

Does passing a 101PD practice test mean I'll pass the real CSLB exam?

No. It means you handled this set of original questions well. Only CSLB and its testing vendor administer and score the exam that counts toward a contractor license.

Is there a fee for 101PD's CSLB practice tests?

No. The Law & Business practice tests are free right now — not a limited-time launch offer. There is no card, coupon, or account requirement to read questions.

What if I want help with real estate or another California profession too?

101PD also builds exam preparation and continuing education for other California professions, including real estate — relevant if your contracting work ever crosses into property sales or development. See the full catalog at /professions.

Practice tests — not official CSLB exams. Not affiliated with the Contractors State License Board or any government agency.

Official source: cslb.ca.gov