When processing a payment application, which document should be verified first to ensure the contractor is authorized to perform work?
Correct Answer
C) Business License
The business license should be verified first to confirm the contractor is legally authorized to perform the work. Without proper licensing, the contract may be void and payment could be legally problematic.
Why This Is the Correct Answer
The business license must be verified first because it establishes the fundamental legal authority of the contractor to perform construction work. Florida law requires contractors to be properly licensed before entering into contracts or performing work. Without a valid license, any contract may be void or voidable, making payment legally problematic and potentially exposing the payer to liability. This verification protects all parties and ensures compliance with state licensing requirements.
Why the Other Options Are Wrong
Option A: Progress Schedule
Lien waivers are important for protecting against future lien claims but do not establish the contractor's authorization to perform work. They are typically processed after confirming the contractor's licensing status and are part of the payment process rather than authorization verification.
Option D: Lien Waiver
A progress schedule shows the planned timeline for work completion but has no bearing on whether the contractor is legally authorized to perform the work. Schedule verification is a project management function, not a licensing compliance issue.
Memory Technique
Think 'License to Work' - just like James Bond needs a 'License to Kill,' contractors need a license to work. Check the license FIRST before anything else matters.
Reference Hint
Florida Building Code Chapter 1, Part I - Administration and Enforcement, or Florida Statutes Chapter 489 - Contracting
More Business & Finance Questions
A general contractor purchases equipment worth $45,000 with a useful life of 9 years and no salvage value. Using straight-line depreciation, what is the annual depreciation expense?
What is the typical recommended coverage amount for general liability insurance for a small to medium-sized general contracting business?
A contractor estimates startup costs of $75,000 for equipment, $25,000 for initial inventory, $15,000 for insurance premiums, and $10,000 for working capital. They can finance 70% of the total. How much cash do they need?
When establishing professional relationships with architects and engineers, what is the most important factor for a general contractor to consider?
A partnership agreement for a construction company should address all of the following EXCEPT:
A contractor purchases a truck for $60,000. After 5 years, it has accumulated depreciation of $35,000. What is the truck's book value?
A contractor's business plan projects first-year revenue of $500,000 with a 15% net profit margin. If actual revenue is $450,000 with the same profit margin, what is the variance in net profit?
Using the Modified Accelerated Cost Recovery System (MACRS), construction equipment is typically depreciated over how many years?
A contractor is comparing financing options for equipment purchase. Option A: $80,000 cash purchase. Option B: $20,000 down, $65,000 financed at 6% for 4 years. What is the total cost of Option B?
A contractor purchases equipment using a capital lease with a present value of $120,000. How should this be recorded on the balance sheet?