Every applicant for a new California contractor license has to clear two exams: a trade classification exam and the Law and Business exam. The Law and Business exam is the one that tests whether you know the legal and financial rules of running a contracting business in California, and it applies no matter which trade you are licensing for.
What is the California contractor Law and Business exam?
It is a required exam administered by PSI Services on behalf of the Contractors State License Board (CSLB), taken closed-book on a computer at a PSI test center. It is scored separately from the trade classification exam, so passing one does not substitute for the other. You need to pass both to qualify for a license.
Who actually needs to take it?
Anyone applying for a new California contractor license, across every trade classification the CSLB licenses. The trade exam changes depending on what you are licensed to do; the Law and Business exam does not. It tests the same body of business and legal knowledge regardless of whether you are applying as a general contractor, an electrician, or a specialty trade.
What does the exam actually test?
The CSLB’s own study guide splits the exam into seven sections, and this app’s practice questions and mock exams follow the same official blueprint:
- Business Organization and Licensing (about 13%): business entity types, license classifications, exemptions, and applying for and keeping a CSLB license.
- Business Finances (about 15%): accounting, financial statements, estimating and bidding, cash flow, and taxes.
- Employment Requirements (about 20%): the largest section. Hiring, wages and hours, payroll taxes, and workers’ compensation.
- Insurance and Liens (about 12%): contractor bonds, insurance types, and the mechanics lien and stop-notice process.
- Contract Requirements and Execution (about 21%): the other large section. Home improvement and service contracts, required terms, cancellation rights, and down payment limits.
- Public Works (about 5%): prevailing wage, DIR registration, and certified payroll on public projects.
- Safety (about 14%): Cal/OSHA duties, the Injury and Illness Prevention Program, and construction safety orders.
Six of these seven sections trace back to enacted California law: the Business and Professions Code (the Contractors State License Law), the Civil Code’s mechanics lien provisions, the Labor Code, and Title 8 construction safety orders. Business Finances is the one exception, drawn from independently authored general business-finance material rather than statute text.
How is the exam scored?
CSLB does not publish an exact scored-question count or a fixed passing score. Prep sources commonly describe the exam as about 115 multiple-choice questions, and CSLB confirms a 3.5 hour (210 minute) time limit. You are told the percentage of correct answers needed to pass at the test site, and that percentage varies by exam, so any specific pass mark you see quoted elsewhere is not an official CSLB figure.
When does a license actually become required?
Once the combined cost of labor and materials on a job reaches 500 dollars or more, California requires a contractor license for that work (Business and Professions Code Section 7048). Below that threshold, work can fall under the minor-work exemption, but splitting a larger job into smaller contracts to stay under the cap is not a way around the requirement.
How does this app help you prepare?
The practice bank and mock exams are organized around the same seven official sections and their real weights, so the mix of questions you drill matches the actual exam blueprint rather than a generic study list. Every question cites the California statute it comes from, and it works fully offline once installed, so you can study anywhere without a data connection. Since CSLB does not publish a fixed pass mark, practicing against a strict internal target across all seven sections is the most reliable way to prepare for a moving official number.