Free contractor business and law examination Practice Questions

Sample Practice Questions

Try these 10 sample questions from the contractor business and law examination practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1An Arkansas contractor wants the simplest one-owner business form and accepts that the owner and business will have no separate legal identity. Which form fits that choice?

   1. A. Sole proprietorship
   2. B. General partnership
   3. C. Limited liability partnership
   4. D. Corporation

   Answer: A

   Explanation: The Secretary of State guide states, "In this situation, the owner and the business are indistinguishable." That description applies to a sole proprietorship.

   Reference: Arkansas Doing Business (2025) — Section 2, p. 4, Sole Proprietorship

2. 2A commercial contractor entered a construction contract while violating Arkansas contractor licensing law. What is the general rule on suing to enforce that contract?

   1. A. The contractor may enforce it after substantial completion
   2. B. No action at law or equity may enforce it, subject to the statutory exception
   3. C. Only the owner is barred from enforcement
   4. D. Enforcement is automatic if the contract was written

   Answer: B

   Explanation: Ark. Code Ann. § 17-25-103(d)(1) states, "no action may be brought either at law or in equity to enforce any provision of any contract entered into in violation of this chapter."

   Reference: Arkansas Commercial Contractors Law (2026) — Ark. Code Ann. § 17-25-103(d), p. 6

3. 3A paid renovation will disturb painted surfaces in a child-care facility built in 1975. Which federal program generally applies?

   1. A. EPA Lead Renovation, Repair and Painting Rule
   2. B. EPA asbestos National Emission Standards
   3. C. EPA Construction General Permit program
   4. D. EPA hazardous-waste generator rules

   Answer: A

   Explanation: EPA says the rule "applies to work in houses, apartments and child-occupied facilities (such as schools and child care centers) built before 1978" and includes education, training, certification, and work-practice requirements.

   Reference: Renovation, Repair and Painting Program: Contractors | US EPA — Renovation Program Overview

4. 4What type of financial statement must generally accompany an Arkansas unrestricted commercial contractor application?

   1. A. An unaudited personal cash worksheet
   2. B. A compiled statement without an accountant report
   3. C. An audited or reviewed company statement with the appropriate independent accountant report
   4. D. A project estimate signed by the owner

   Answer: C

   Explanation: 17 CAR § 255-401(a)(1) calls for "An audited or reviewed financial statement" and the corresponding opinion letter or review report from an independent CPA or RPA.

   Reference: Arkansas Commercial Contractors Law (2026) — 17 CAR § 255-401(a)(1), p. 46

5. 5What continuing insurance duty applies to an Arkansas contractor required to be licensed or registered?

   1. A. Maintain workers' compensation coverage when required by the Workers' Compensation Law
   2. B. Maintain only builder's risk insurance
   3. C. Maintain a personal auto policy
   4. D. Maintain title insurance on every project

   Answer: A

   Explanation: Ark. Code Ann. § 17-25-316(a) requires the contractor to "obtain and maintain workers' compensation coverage as required under the Workers' Compensation Law."

   Reference: Arkansas Commercial Contractors Law (2026) — Ark. Code Ann. § 17-25-316(a), p. 18

6. 6A covered, nonexempt construction employee works 46 hours in one workweek. What is the federal minimum overtime rate for the six overtime hours?

   1. A. The regular rate
   2. B. One and one-quarter times the regular rate
   3. C. One and one-half times the regular rate
   4. D. Twice the regular rate

   Answer: C

   Explanation: The U.S. Department of Labor states that the FLSA requires overtime pay "to be at least one and one-half times an employee's regular rate of pay after 40 hours of work in a workweek."

   Reference: Overtime | U.S. Department of Labor — Overtime Pay overview

7. 7After receiving a notice to proceed on an Arkansas state capital-improvement project, how soon must the contractor submit the schedule of values and project schedule?

   1. A. Within 5 calendar days
   2. B. Within 10 business days
   3. C. Within 15 calendar days
   4. D. Within 30 business days

   Answer: B

   Explanation: 22 CAR § 112-407(b)(3) begins, "Within ten (10) business days after the notice to proceed," and then requires the contractor's submissions.

   Reference: 22 CAR § 112-407. Construction contracts - Code of Arkansas Rules — 22 CAR § 112-407(b)(3)

8. 8An Arkansas corporation elects Subchapter S tax treatment. Where are its profits and losses generally reported?

   1. A. Only on a partnership return with no owner reporting
   2. B. Only on a state franchise report
   3. C. On the owners' personal tax returns
   4. D. Only when dividends are distributed

   Answer: C

   Explanation: The state guide describes S corporations as pass-through entities, "meaning their profits and losses are reported by their owners on the owners' personal tax returns."

   Reference: Arkansas Doing Business (2025) — Section 2, p. 7, S Corporation

9. 9What is the principal purpose of an Arkansas construction lien described in the Contractors Licensing Board's residential application guidance?

   1. A. To increase a contractor's license classification
   2. B. To secure payment for labor or materials used to improve property
   3. C. To replace workers' compensation coverage
   4. D. To transfer the owner's tax permit

   Answer: B

   Explanation: The Board guidance states, "The purpose of the lien is to secure payment for the labor or materials used improving the property."

   Reference: State of Arkansas — p. 11, LIEN LAW

10. 10A contractor bids $50,000 of labor and materials on a nonresidential Arkansas improvement. At what project amount does the commercial licensing definition apply?

    1. A. $20,000 or more
    2. B. $25,000 or more
    3. C. $50,000 or more
    4. D. $100,000 or more

    Answer: C

    Explanation: Ark. Code Ann. § 17-25-101(a)(1) applies when the cost, including labor and materials, "is fifty thousand dollars ($50,000) or more."

    Reference: Arkansas Commercial Contractors Law (2026) — Ark. Code Ann. § 17-25-101(a)(1), p. 3