Business Organization & Licensing — California C-36 Practice Questions

30 questions · 13% of the Law & Business exam

Worked questions

1. A C-10 licensee is asked to perform unrelated structural remodeling as the only trade. What should be checked?

AAny contractor license permits every trade
Verify the classification's scope
CPrice determines classification
DThe customer may waive licensing

Why B is correct

Classifications define authorized contracting scope. A private request or low price does not expand a specialty license beyond the work legally permitted.

2. Before signing a contract, why should the contractor confirm the entity license is active and properly classified?

AThe customer’s signature cures the defect
BA bond makes an inactive license active
CStatus matters only at final inspection
Discipline and lost payment rights

Why D is correct

License status and scope are threshold legal conditions, not paperwork that can be repaired by a customer or bond after performance begins.

3. The only qualifier leaves a licensed entity. What should management do first?

AUse another company’s license number
BContinue indefinitely without notice
Follow CSLB replacement rules
DBackdate a qualifier agreement

Why C is correct

Loss of a qualifier can affect the entity’s ability to operate legally and triggers time-sensitive CSLB obligations. Management should verify current official requirements rather than conceal or backdate the change.

4. What identifying information is generally required in a licensed contractor’s construction advertising?

The contractor license number
BNo identity if advertising online
COnly the qualifier’s nickname
DA competitor’s license number

Why A is correct

Advertising rules help consumers verify who is offering the work and whether the license is active and appropriate. The named business and license information must be accurate.

5. An unlicensed operator writes four $450 invoices for one $1,800 undertaking to claim each is below the small-job exemption. Does splitting the invoices make the work lawful?

ANo, because no exemption ever exists
BYes, invoice count controls
No; splitting changes nothing
DYes, if paid in cash

Why C is correct

The best answer is: No; splitting changes nothing. License requirements apply to the project undertaken, including labor and materials under the governing rule. Structuring paperwork to conceal the real scope can create enforcement and payment consequences. The new fact pattern changes the setting, not the governing rule or management control. The other choices either skip a required step, apply a different rule, or fail to address the stated risk.

6. Two LLC members each believe only the other can approve contracts over $100,000. Which governing document should resolve the authority question?

ATo replace the contractor license
BTo eliminate accounting records
CTo transfer every risk to customers
To define who may bind the company

Why D is correct

The best answer is: To define who may bind the company. Written governance reduces unauthorized contracts, borrowing, distributions, and disputes. It complements rather than replaces licensing, accounting, insurance, and statutory obligations. The new fact pattern changes the setting, not the governing rule or management control. The other choices either skip a required step, apply a different rule, or fail to address the stated risk.

24 more in the bank

Answers and explanations for these are in the app.

A contractor advertises under a name not associated with its CSLB record. What should happen?
A corporation signs a construction contract, but the qualifying officer signs only a personal nickname. What should the contract identify?
A qualifying individual lends a name to a company but exercises no supervision or control over construction operations. What is the issue?
A sole-owner licensee incorporates a new company. May the corporation automatically contract under the individual license?
A subcontract proposal displays a license number belonging to a different entity. What should the prime do?
May a contractor enter new contracts while its license is inactive?
May an unlicensed person divide one larger project into several invoices to stay below an exemption threshold?
Two partners disagree about who may sign bids and borrow money for the contracting business. What should be established?
What should a responsible managing employee or officer be able to demonstrate?
Why should an LLC operating agreement define member and manager authority?
Why should corporate and personal funds and records be kept separate?
A C-36 contractor is offered a separate contract to alter structural beams with no plumbing component. Which licensing question comes first?
A contractor leaves its license inactive to save fees but signs two new construction contracts. May it enter those contracts while inactive?
A contractor markets under a new fictitious name before associating it with the CSLB license record. What should occur before contracting under that name?
A corporation's estimator signs a large subcontract although no policy states who may bind the company. Which preventive control is most appropriate?
A corporation's license became suspended before it executed a new contract. Why must active status be restored first?
A corporation's proposal names only its officer and never identifies the licensed company that will perform the work. What should the agreement show?
A licensed company learns on Monday that its sole qualifier has resigned. What should the company address without delay?
A licensed contractor's online ad includes a phone number and logo but omits the CSLB number. What identifying information should be added?
A proposal uses an active license number, but it belongs to a sister company rather than the proposing entity. What must the prime confirm?
A qualifier appears on company records but never reviews bids, field operations, or workmanship. Which duty is being neglected?
An individually licensed contractor creates a corporation and accepts the corporation's first job before CSLB issues it a license. May the corporation lawfully rely on the individual's license?
An owner pays household bills directly from the contracting company's account and records them as job costs. Why should the practice stop?
An RME spends all working time at another business and cannot describe the licensed company's projects. What must the RME actually provide?

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