If you are getting a Tennessee contractor license, the Business and Law Management Examination is one of the gates you walk through. It is administered by PSI, it is open book, and it covers the business and legal knowledge a contractor needs to operate in Tennessee. This post explains the format, the rules, and what each content area covers.
The exam at a glance
The numbers first, because this is a numbers-heavy test:
- 50 questions. Every question counts the same.
- 73 percent to pass. That is 37 correct out of 50.
- 140 minutes. That works out to about 2 minutes and 48 seconds per question.
- Open book. You may bring one reference into the exam room.
- $57 exam fee. Confirm the current fee in the PSI bulletin before you pay, since fees can change.
This is an independent study aid, not affiliated with the Tennessee Board for Licensing Contractors, PSI, or NASCLA. Always check the current PSI Candidate Information Bulletin for the exact rules at your test center.
Open book: what that really means
Open book does not mean easy. It means the exam tests whether you can find the right rule under time pressure, not whether you memorized every statute. The only allowed reference is the Contractors' Guide to Business, Law and Project Management, Tennessee Edition, 4th Edition (the NASCLA book). No other references are permitted.
You may highlight, underline, and index the book with permanent tabs before the exam. You may not write in it during the exam. A silent, nonprinting, nonprogrammable calculator is allowed. The open-book strategy that works is a tabbing map: permanent tabs for each content area and highlighted numbers throughout the book, built before exam day so you never hunt blind.
The time math is the whole game. At 2 minutes 48 seconds per question, you have room for questions you know and questions you can look up quickly. You do not have room to read the book like a novel. People who walk in with an untabbed, unmarked book routinely run out of time. People who walk in with a mapped book finish with minutes to spare.
The 9 content areas
The official outline divides the 50 questions into 9 areas:
Licensing Requirements (5 questions). When a license is required, the classifications, the monetary limit, qualifying agents, renewals, and discipline. The $25,000 license trigger lives here, along with the 9 major classifications and the qualifying-agent rules.
Estimating and Bidding (7 questions). Bid-envelope disclosure for projects of $25,000 or more, the 48-hour correction window for typographical errors, public-works payment bonds, and the Prompt Pay Act. These questions turn on specific thresholds and timelines.
Business Organization and Financial Management (7 questions). Business structures, registered agents, annual reports, financial statements, and the monetary-limit formula: 10 times net worth or 10 times working capital, whichever is less, with a 10 percent tolerance above the limit.
Tax Laws (5 questions). Sales and use tax, business tax, franchise and excise tax, payroll taxes. Tennessee has no state income tax, which the exam expects you to know.
Labor Laws (5 questions). Workers' compensation (required at 1 or more employees in construction, versus 5 or more generally), unemployment insurance, child labor rules, right-to-work, and the drug-free workplace program.
Project Management and Lien Law (6 questions). Lien recording deadlines (90 days after completion or abandonment), notices of nonpayment, notices of completion, retainage escrow, and lien priority.
Contracts (6 questions). Contract formation, home improvement contract requirements, pay-if-paid clauses, and statutes of limitation and repose. Tennessee courts enforce pay-if-paid clauses when the contract expressly makes owner payment a condition precedent.
Risk Management (4 questions). Insurance types and minimums: general liability minimums tied to the monetary limit, auto liability minimums of 25/50/25, and the home improvement bond of $10,000.
Environmental and Safety (5 questions). TOSHA, the federally approved Tennessee state plan, plus fall protection, excavation rules, the construction stormwater permit, lead-safe work, Tennessee 811, and asbestos.
What to bring on exam day
- The NASCLA Tennessee 4th Edition book, tabbed and highlighted before you arrive.
- A silent, nonprinting, nonprogrammable calculator.
- Acceptable identification as listed in the PSI bulletin.
- Your confirmation and the exam fee payment as instructed.
Do not bring other books, notes, or study materials. Temporary tabs are not permitted; only permanent tabs placed before the exam. Arrive early enough to check in without rushing.
The numbers worth drilling
Open-book exams still reward people who know the key figures cold, because every number you have memorized is a lookup you skip. Drill these until they are automatic:
- $25,000: the license trigger and the bid-disclosure threshold.
- 37 of 50: the passing score.
- 140 minutes: the time limit.
- 10 percent: the monetary-limit tolerance (not for BC-A/r licensees).
- 10 days: qualifying-agent notice to the Board; 3 months to appoint a replacement.
- 90 days: lien recording deadline; renewal notice window.
- 30 days: renewal receipt deadline; prompt-pay clocks.
- 48 hours: bid-error correction window.
- $57: the exam fee.
When you work practice questions, notice how many turn on a single figure. That pattern is the exam.
How this exam compares to trade exams
The Business and Law exam is a separate animal from any trade exam for your classification. Trade exams test craft knowledge. This one tests whether you can run a contracting business inside Tennessee law: licensing, money, contracts, taxes, employees, insurance, and safety. Field experience helps with the safety and project-management questions, but it will not carry you through tax law or lien deadlines. Study it as its own subject.
Try the free practice quiz
Want to see where you stand right now? Take the free 12-question Tennessee Business and Law practice quiz. You will get your score with explanations for every answer, so you can see exactly which topics need work. Start the free quiz