South Carolina Business Management and Law Exam

Key Concepts

Business Entity Types & Liability

• Sole Proprietorship: Simplest structure; owner has unlimited personal liability for all business debts and obligations. No separation between personal and business assets.
• Partnership: Two or more owners; general partners carry unlimited personal liability. Limited partners are liable only to the extent of their investment.
• Corporation: Owners (shareholders) have limited liability — personal assets are protected from business debts. Subject to double taxation (corporate level + shareholder dividends).
• LLC (Limited Liability Company): Combines limited liability protection of a corporation with pass-through taxation of a partnership. Most flexible structure for small contractors.

Taxation by Entity

Key Concepts

Bid Documents (NASCLA Ch. 7) A complete bid package includes: invitation to bid, bid instructions, bid forms (bid sheet, bid schedule, bidder's questionnaire, copy of contract), and supplements (property survey, soil analysis). Missing or incorrectly submitted information makes a bidder unresponsive — disqualifying the bid entirely.

Addenda: Any change to a bid package before submission requires an addendum. The addendum becomes part of the bid documents and ultimately part of the awarded contract. You must review all addenda — they can change your price or your decision to bid.

Key Concepts

Required Contract Elements (4 Required)

1. Offer and Acceptance — Offer outlines work and compensation (a bid/estimate qualifies). Acceptance = signing. A counteroffer is NOT acceptance. Offers expire in 30 days (or "reasonable time" if unstated — court-determined).
2. Consideration — Both parties must exchange something of value (typically services for money).
3. Competent Parties — Parties must be of sound mind and legal capacity. Minors cannot contract without parental consent. Intoxicated or mentally disabled individuals may be ruled incompetent.
4. Legal Purpose — Contract must be possible to perform, not harmful, and require no illegal activity (e.g., building code violations = invalid contract).

5 questions | 10% of exam weight

Key Concepts

Scheduling Process Elements

• Sequence of tasks: The logical order in which activities must be performed; some tasks cannot start until predecessors are complete (dependencies).
• Activity duration: Estimated time to complete each individual task.
• Float time (slack): The amount of time a task can be delayed without delaying the overall project completion. Tasks on the critical path have zero float.
• Contingency time: Buffer time built into the schedule to account for unforeseen delays, weather, or risk events. Distinct from float — it is a deliberate reserve.

Key Concepts

Surety Bond Types

• Bid Bond: Guarantees the bidder will enter into the contract and provide required bonds if awarded; protects the owner if the low bidder refuses the contract.
• Performance Bond: Guarantees the contractor will complete the project per contract terms; protects the owner against contractor default.
• Payment Bond: Guarantees the contractor will pay subcontractors, laborers, and material suppliers; protects against mechanics' liens.
• Maintenance Bond: Covers defects in workmanship or materials for a specified period after project completion.
• Completion Bond: Guarantees the project will be completed free of liens; often required by lenders.
• Fidelity Bond: Protects the employer against employee dishonesty, theft, or fraud.
• Lien Bond: Releases a mechanics' lien from a property by substituting the…

Key Concepts

OSHA Forms Overview

• Form 300 (Log of Work-Related Injuries and Illnesses): Running log maintained throughout the year documenting each recordable incident. Must be kept current.
• Form 300A (Summary of Work-Related Injuries and Illnesses): Annual summary of the Form 300 log. Must be posted February 1 – April 30 each year, even if no recordable incidents occurred.
• Form 301 (Injury and Illness Incident Report): Completed for each individual recordable incident within 7 calendar days of learning of the injury/illness. Contains detailed information about the incident.

Key Concepts

Fair Labor Standards Act (FLSA)

• Federal minimum wage: $7.25/hour; SC has no higher state minimum wage
• Overtime required at 1.5× regular rate for all hours over 40 in a workweek for non-exempt employees
• Misclassifying employees as independent contractors to avoid overtime is a common FLSA violation

Employee vs. Independent Contractor (IRS Guidelines)

• IRS uses a behavioral control, financial control, and type-of-relationship test
• Key factors: Does the company control how work is done (employee) vs. only results (contractor)?
• Misclassification exposes employers to back taxes, penalties, and benefits liability

Key Concepts

Accounting Cycle Steps: Journal entry → post to ledger → trial balance → adjusting entries → adjusted trial balance → financial statements → closing entries. Special journals include sales, purchases, cash receipts, and cash disbursements journals.

Financial Statements: - Balance Sheet: Assets = Liabilities + Owner's Equity (snapshot at a point in time) - Income Statement: Revenue – Expenses = Net Income (period performance) - Statement of Cash Flows: Operating, investing, and financing activities

Contract Accounting Methods: - Completed Contract Method: Revenue and expenses recognized only when the project is fully complete. Used for short-term or uncertain projects. - Percentage of Completion Method: Revenue recognized proportionally as work progresses. Formula: (Costs incurred to date ÷ Total estimated costs) × Total contract price = Revenue…

Key Concepts

Federal Employer Identification Number (EIN)

• Required for businesses with employees, corporations, partnerships, and any entity filing employment or excise tax returns.
• Obtain via IRS Form SS-4: online (immediate), by fax (~4 business days), or by mail (~4 weeks). Online is fastest.
• Sole proprietors with no employees may use their SSN instead, but an EIN is required once they hire.

Federal Business Tax Types by Entity

• Sole Proprietor: Pays income tax + self-employment (SE) tax (Schedule C + Schedule SE on Form 1040).
• Partnership: Files informational return (Form 1065); partners pay income and SE tax on their share (Schedule K-1).
• C Corporation: Pays corporate income tax at flat 21% federal rate; shareholders also taxed on dividends (double…

Key Concepts

Who Can File a Lien (Title 29, Chapter 5) Lien rights extend to general contractors, subcontractors, suppliers, site work contractors, architects, engineers, surveyors, laborers, and even private security companies working on-site. The debt must be for labor performed or materials furnished and actually used in the erection, alteration, or repair of a building or structure on real estate, or for boring and equipping wells.

Licensing Requirement (SC Code §40-59-30(B)): Unlicensed contractors performing residential building or residential specialty contracting cannot file a mechanics' lien and cannot bring any legal action to enforce such contracts. No license = no lien rights on residential work.

Key Concepts

Regulatory Authority - EPA sets and enforces federal environmental standards nationally - SC DHEC (Department of Health and Environmental Control) is the state agency that implements and enforces environmental regulations in South Carolina, often operating as the delegated authority under federal programs

Key Federal Environmental Laws - Clean Water Act (CWA): Controls discharge of pollutants into U.S. waters; requires NPDES permits for stormwater discharge from construction sites - Clean Air Act (CAA): Regulates air emissions; applies to construction dust, asbestos demolition/renovation, and diesel emissions - Endangered Species Act (ESA): Prohibits harm to federally listed species; may restrict or halt construction activity in certain habitats - National Environmental Policy Act (NEPA): Requires environmental impact assessments for federally funded or approved projects; may require an Environmental…