What is on the California Law and Business Exam?

  • Posted by Melanie Klag
    What is on the California Law and Business Exam?

    Knowing the trade is not enough to run a construction business and manage large-scale construction projects. For this reason, the CA Law and Business Exam is a mandatory requirement for a California contractor license. 

    Running a contracting business demands more than technical skill. The CA Law and Business Exam is just as important as your trade exam because it verifies your understanding of California contractor business processes, laws, safety regulations, and more. It helps ensure you have the skills to manage employees and follow labor laws, as well as handle contracts and protect consumers. 

    California Law and Business Exam Overview 

    According to the requirements set by the Contractors State License Board (CSLB), this is what you should anticipate from the CA Law and Business Exam. 

    • Who is the exam for: The exam is required for every contractor classification, including General Engineering (A), General Building (B), Residential Remodeling (B-2), and Specialty (C) contractors.
    • Format: Multiple-choice questions.
    • Closed-book exam
    • Time allowed: 3.5 hours
    • Passing score: You’ll need 72% of the questions correct to pass 

    The CSLB notes that more than 50,000 people take the exam each year. While pass rates vary, exam prep programs often cite pass rates of around 70% for first-time test-takers (with Contractor Training Center seeing an average of 90% pass rate for first-time exam takers), so studying thoroughly is critical. 

    Think you're ready for the exam? Test your knowledge with our free CA Law and Business practice test!


    Key Topics Covered on the CA Law and Business Exam 

    The exam consists of multiple sections. They are: 

    Business Organization and Licensing (13%) 

    • Various business forms, including corporations, partnerships, LLCs, and sole proprietorships
    • How to correctly register your company in California
    • Owner, managers, and employee responsibilities
    • Advertising and subcontracting requirements/regulations 

    Business Finances (15%) 

    • The fundamentals of record-keeping and accounting
    • Overseeing financial flow, company planning, and budgeting
    • California tax regulations, due dates for reports, and requirements for compliance 

    Employment Requirements (20%) 

    • Federal and state labor laws
    • Payroll regulations
    • Hiring employees and worker classification: independent contractor versus employee
    • Supervising and training employees  
    • Evaluation and record-keeping  

    Contract Requirements and Execution (21%) 

    • Essential components of a California contract
    • Bidding and project organization
    • Project management and payment
    • Change orders, contract modifications, and how to handle disputes
    • Recognizing the choices for dispute resolution and contract violations 

    Safety (14%) 

    • Programs and training for workplace safety and communication about hazards
    • Guidelines for reporting injuries and accidents
    • OSHA safety rules that contractors must abide with 

    Insurance and Liens (12%) 

    • Types of insurance (general liability, workers' compensation, etc.) that all contractors should possess.
    • CSLB bonding specifications and their applicability
    • How bonding and insurance safeguard you and your customers 

    Public Works (5%) 

    • Prevailing wage requirements 
    • Bonding requirements  
    • Insurance requirements 

    The percentage of questions in each area is noted in parentheses. More information is available in the comprehensive study guide provided by the CSLB.  

    Important Things to Note About the Exam 

    Unlike many state contracting exams, California does not allow test takers to use textbooks or other reference materials. The CA Law and Business Exam, as well as the trade exams, are closed-book. Therefore, studying is paramount.  

    Some questions on the computer-based Law and Business Exam will ask you to solve mathematical problems. A digital calculator will be provided to you for the entirety of the exam.  

    It is in your best interest to answer every question since there is no penalty for guessing. Take your time and read each question and all four answers thoroughly before making your choice.  

    How to Prepare for the CA Law and Business Exam 

    To successfully pass this exam, students must grasp California contracting principles rather than simply memorize information. The following methods will help you prepare for the exam: 

    • Begin your preparation by using the official CSLB study guide: The guide serves as your main study resource. The guide presents all the topics which will appear on the exam.
    • Use prep courses: Professional exam prep courses such as our California contractor courses serve as the preferred choice for many contractors because they offer organized learning paths and current information and qualified instruction.
    • Take practice exams: The process of taking tests multiple times will help you develop greater confidence. Find an exam prep course with an exam simulator that mimics the CA Law and Business Exam.
    • Focus on weak spots: Most contractors demonstrate better understanding in specific areas such as contracts and safety but struggle with subjects like accounting and labor law. Devote additional study time to the subjects which need the most improvement.
    • Set a study schedule: Don’t cram; rather, study your material through regular sessions that span multiple weeks instead of trying to learn everything at once. 

    Helpful reminder: Start early. Give yourself at least 4-6 weeks to prepare. It’s easy to underestimate the amount of material covered. 

    Why This Exam Matters 

    Passing the CA Law and Business Exam is a significant step toward becoming a licensed California contractor, and once you do, you will be qualified in your trade and equipped to handle the business side with confidence.  

    The exam is not just another obstacle; it is meant to ensure that California contractors know how to: 

    • Run a business legally and responsibly; 
    • Protect themselves and their clients;  
    • Avoid costly mistakes that could put their license or livelihood at risk. 

    Start Your Exam Prep Today 

    You cannot afford to take the CA Law and Business Exam lightly if you are serious about becoming a contractor in California. Study materials, practice tests, and possibly even a prep course can help you be ready and confident on test day.  

    At Contractor Training Center, we are here to help you at every turn – from exam preparation through the contractor application processing service. Sign up today for our California General Building (B) Contractor Exam Prep Course, which also includes information on the Law and Business Exam, and be fully prepared to earn your license!  

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