If you are getting a Hawaii contractor license, you will take the Business and Law exam. Every new applicant takes it, no matter the classification. There is no way around it, and the one fact that shapes everything about preparing for it is this: it is closed book. No reference materials are allowed in the exam center. What you know walking in is what you have. This post explains what the exam covers, how it works, and how to walk in prepared.
This is an independent guide, not affiliated with the Hawaii Department of Commerce and Consumer Affairs, the Contractors License Board, or PSI. Licensing details change, so verify current requirements against the Board's official publications before you act.
What this exam actually tests
This is not a trade skills test. Nobody is asking you to size a beam or wire a panel. The exam tests whether you know the business and legal side of running a contracting company in Hawaii: licensing rules, business organization, contracts, estimating and bidding, financial management, labor law, lien law, project management, risk management, safety, and tax law.
The current exam is divided into eleven content areas (outline effective March 30, 2026, per PSI bulletin 10625, revised 1/20/2026):
Business Organization (3 questions). Corporations and LLCs: annual reports and their quarterly due dates, registered agents, trade names, and what each business structure means for liability. A small section, so memorize the few testable figures and move on.
Contract Management (12 questions). One of the two heaviest sections. Hawaii's homeowner-contract rules: the verbal lien-rights disclosure, the written pre-contract disclosures, the required contents of a homeowner contract, and workmanlike performance. Public-contract payment rules live here too: the 30-day government payment clock, the prime-plus-2% late interest, and change-order funding rules.
Estimating and Bidding (10 questions). The Hawaii Public Procurement Code: small-purchase thresholds, the two bond triggers, and the bond-claimant timelines. This section is almost pure numbers, which makes it cheap points if you drill them.
Financial Management (9 questions). Financial statements for licensure, record retention, the Recovery Fund assessment chain, and the education fund fee. Know what "current" means for each document type.
Labor Law (5 questions). Prevailing wage on public works, overtime, weekly pay, workers' comp and unemployment coverage, wage-payment timing, temporary disability insurance, and the Prepaid Health Care Act. Small section, but the one-employee coverage thresholds surprise people from mainland states.
Licensing (8 questions). The HRS Chapter 444 and HAR Chapter 77 material: the handyman exemption, experience requirements, the discretionary bond, renewal and forfeiture, the Recovery Fund, RME rules, fees, advertising, and insurance.
Lien Law (5 questions). Mechanics' and materialmen's liens under HRS Chapter 507, Part II: the 45-day filing window, the 3-month enforcement deadline, notice-of-completion publication, and discharge at twice the claim.
Project Management (9 questions). Application processing, joint ventures, RME management duties, address changes, and the payment and retainage rules that govern how projects are administered.
Risk Management (8 questions). Insurance requirements and what happens when coverage lapses, the discretionary license bond, public-works bonds, and lien discharge.
Safety - OSHA (6 questions). Hawaii is an OSHA state-plan state (HIOSH), not a federal-OSHA state. The enforceable standards are the HIOSH standards in HAR Title 12, plus the statutory safety-program requirement on larger construction contracts.
Tax Laws (5 questions). The General Excise Tax (4% plus the county surcharge), the Transient Accommodations Tax, withholding, and the federal payroll taxes.
How the exam works
The exam is computer-based at PSI test centers. It is multiple choice with four options and one best answer per question. It is closed book: the PSI bulletin lists study references (the NASCLA Hawaii guide, HRS chapters 103 and 104, and HAR Title 12 Chapter 22), but none of them are permitted at the test center. This is a memorization exam. There is no tabbing strategy and no open-book lookup. Drill the numbers until they are automatic.
The exam has 80 questions, and you need 75 percent (60 correct) to pass. The time limit is 180 minutes, which works out to 2.25 minutes per question. A PSI-provided calculator is available; do not bring your own. Answer every question. Leaving one blank helps nothing.
Two exams, actually: Part I tests general knowledge of Hawaii's building, safety, health, labor, and lien laws plus the basic administrative principles of the contracting business. Part II tests specialized knowledge in the classification you are seeking. You need 75 percent on each part. Examinations are given monthly.
The exam fee is $80 (applicants for the A-General Engineering and B-General Building classifications pay $85). If you fail, you must pass within 6 months or file a new application with a new application fee. Examination misconduct can get the entire examination invalidated and suspend you from re-examination for up to 3 years, so do not test the rules.
What trips people up
Trade veterans fail this exam regularly when they assume field experience is enough. It is not. The exam tests statutes, not craft. And because it is closed book, you cannot look up the figure you are unsure about. The questions that separate passers from failers are the number questions: is the handyman exemption $1,000 or $1,500? Is the renewal deadline September 30 or November 30? Is the lien filing window 45 days or 90? Each of those has a wrong answer that looks right, usually because it is the figure from a stale source or a different state.
The other trap is mixing up similar-sounding rules. The RME departure rules are a 60-day notice and a 90-day replacement window. The recovery-fund assessment forfeiture is 60 days to pay and 30 days to restore. The bond-claimant pattern is 90 days for notice, 90 days before suit, and 1 year to file. The exam loves clusters of same-sounding numbers. Learn the statute behind each one.
The numbers worth drilling first
If you only memorize ten figures before exam day, make them these:
- $1,500, labor and materials only. The handyman licensing exemption. Taxes do not count. The DCCA's own HRS 444 PDF still shows the pre-2019 $1,000 text, which is stale. The exam tests the current $1,500 figure.
- September 30 of even-numbered years. The renewal deadline. Miss it and the license forfeits automatically on October 1. November 30 is only the restoration deadline, with a $50 penalty. Do not teach yourself "expires November 30."
- 45 days to file, 3 months to enforce. The mechanics' lien chain. File the Application and Notice of Lien in circuit court within 45 days of statutory completion; the lien expires 3 months after the entry of the Order Directing Lien to Attach unless enforcement begins.
- $2,000. Prevailing wage applies to public-works contracts in excess of $2,000. A 2026 bill proposed $5,000, but it is not law.
- Over $25,000. Public construction contracts above this need a 100% performance bond and a 100% payment bond. The separate small-purchase bond rule triggers at greater than $50,000 for construction. Keep them separate.
- 4% plus 0.5%. The General Excise Tax is 4% on gross income, plus a 0.5% county surcharge (Oahu since 2007, Maui since 2024).
- 10% from 1/1/2026. The Transient Accommodations Tax. Older sources say 9.25%. They are stale.
- $100,000 / $300,000 / $50,000. The liability insurance minimums for renewal. They live in the rule (HAR 16-77-8), not the statute.
- $12,500 per contract, $25,000 per contractor. The Contractors Recovery Fund caps. Original applicants contribute $150; renewals add $10.
- 60 days / 90 days. When an RME dies, dissociates, or becomes disabled: notify the board within 60 days, qualify a new RME within 90 days. While the replacement application is pending, the entity may continue existing operations but may not bid or enter new contracts.
Try the free practice quiz
Reading about the exam is one thing. Sitting with exam-style questions is another. Take the free 12-question Hawaii Business and Law practice quiz to see where you stand, with explanations for every answer.
(PixelSunset is an independent study aid and is not affiliated with the Hawaii Department of Commerce and Consumer Affairs, the Contractors License Board, or PSI.)