Tennessee - Business and Law Management Exam

Tennessee Business and Law Management Exam: Complete 2026 Study Guide

Every Tennessee contractor candidate — building, mechanical, electrical, plumbing, you name it — has to pass the Tennessee Business and Law exam. It doesn't matter if your trade exam is NASCLA-accredited. The Business and Law Management Examination is a separate, required hurdle for every license classification. Pass it, and you're one step closer to your contractor's license. Skip it, and the license doesn't happen.

This guide covers exactly what's on the exam, what score you need, how to register, and how to study smart so you don't waste time on the wrong material. We also have a free practice exam if you want to test yourself right now.

Tennessee Business and Law Exam Overview

The Tennessee Business and Law Management Examination is administered by PSI. Here's what you're working with:

• Questions: 50 scored questions
• Time limit: 140 minutes
• Passing score: 73% — that means 37 out of 50 correct
• Format: Multiple choice, open book
• Approved reference: Contractors' Guide to Business, Law and Project Management – Tennessee Edition, 4th Edition (NASCLA)

Yes, it's open book. But don't let that fool you into walking in unprepared. 140 minutes goes fast when you're flipping through an unfamiliar book under pressure. Candidates who've pre-tabbed and highlighted their reference consistently finish faster and score higher.

You can check scheduling and official exam details at the official exam bulletin.

Topics Covered on the Tennessee Business and Law Exam

The exam tests nine subject areas. Here's how they break down by item count — focus your prep time based on these weights:

Estimating and Bidding and Business Organization and Financial Management each carry 7 items — the most of any topic. That's where you earn or lose the most points. Know how to calculate markup vs. profit margin, understand overhead types, and be comfortable reading a balance sheet.

Contracts and Project Management and Lien Law come next at 6 items each. Tennessee lien law has specific deadlines and notice requirements that trip up a lot of candidates — get those numbers memorized.

Risk Management is the lightest topic at 4 items, but surety bond language and CGL policy details show up in questions that can be genuinely tricky.

Sample Questions

Here are a few questions drawn from the types you'll see on the actual PSI Tennessee Business and Law practice exam. Work through them — but we're not giving you the answers here. Take the free practice exam to see how you do.

Question 1 — Contracts (Hard)

You are a prime contractor involved in a payment dispute with the project owner over a completed phase of work. An architect has been unable to resolve the claim. Your contract specifies a typical claims resolution procedure. What is the next step you should pursue before requesting arbitration?

A) File a mechanic's lien against the property
B) Stop all work on the project immediately
C) File a lawsuit in civil court
D) Pursue mediation

This question tests whether you know the sequence of dispute resolution steps in a standard construction contract.

Question 2 — Business Organization and Financial Management (Easy)

The return on total assets ratio is used to determine if a company's assets are being employed in the best manner.

True/False style item testing your knowledge of financial ratio definitions.

Question 3 — Business Organization and Financial Management (Medium)

The quick ratio (acid test ratio) is calculated by dividing which of the following by current liabilities?

A) Current assets minus inventory
B) Net income minus taxes
C) Total assets minus total liabilities
D) Current assets plus fixed assets

Tests your ability to recall and apply the correct formula for a specific financial ratio.

Question 4 — Project Management and Lien Law (Medium)

Under Tennessee law, how are all mechanics' and materialmen's liens (except laborers' liens) treated relative to each other?

A) They are ranked by the date the contract was signed, earliest having highest priority
B) They are ranked by the dollar amount of the claim, largest having highest priority
C) Prime contractor liens always take priority over remote contractor liens
D) They are on a parity and treated pro rata

You need to know Tennessee's specific lien priority rules — this is TCA 66-11-101 territory.

Question 5 — Risk Management (Hard)

You are a general contractor who has just learned that a subcontractor on your federal project was not paid by a lower-tier subcontractor. The lower-tier subcontractor wants to waive its right to sue on the payment bond before it has furnished any labor or materials. Under federal law, what is the status of such a waiver?

A) The waiver is enforceable if signed by both parties
B) The waiver is enforceable only if approved by the contracting officer
C) The waiver is void because waivers of payment bond protections executed before work begins are not permitted
D) The waiver is valid as long as it is recorded with the surety company

Federal public construction bond law — this one requires knowing the Miller Act rules.

What Types of Questions to Expect

Here's what you'll actually face on each topic, and how many practice questions we have to help you prepare:

Licensing Requirements — 26 practice questions. Expect questions on Tennessee's $25,000 contracting threshold, how to apply, license classifications, renewal deadlines, late penalties, and who is exempt from licensing.

Estimating and Bidding — 35 practice questions. Calculation-heavy. You'll work through quantity take-offs, labor burden, materials costs, overhead allocation, and markup vs. profit margin math. Bring your calculator.

Business Organization and Financial Management — 41 practice questions. The largest topic in our pool. Questions cover entity types (sole prop, LLC, partnership, corporation), financial statements, accounting methods, and financial ratios including liquidity, quick, activity, debt, and profitability.

Tax Laws — 17 practice questions. EIN requirements, which federal tax forms apply to which business structures, self-employment tax, FICA, FUTA, withholding, and payroll deposit schedules.

Labor Laws — 30 practice questions. Workers' comp requirements in Tennessee, exemptions from coverage, the exemption registry process, and FLSA minimum wage and overtime rules.

Project Management and Lien Law — 32 practice questions. Tennessee-specific lien law: definitions, who can file, deadlines (1 year for direct lienors, 90 days for indirect), notice of nonpayment, and notice of completion effects.

Contracts — 36 practice questions. Contract elements, lump-sum vs. unit-price vs. cost-plus formats, breach and remedies, retainage, progress payments, and risk provisions like force majeure and indemnification.

Risk Management — 21 practice questions. Insurance types, surety bonds, CGL and umbrella policies, and bond claim procedures for federal and Tennessee state public construction projects.

Environmental and Safety — 29 practice questions. OSHA recordkeeping (Forms 300, 300A, 301), penalty types and amounts, SDS requirements, lead-based paint regulations, and asbestos notification and TDEC permitting.

In total, we offer 267 practice questions across all nine topics.

Study Materials

The only approved reference book for the exam is the NASCLA Contractors Guide to Business, Law and Project Management, Tennessee 4th Edition. You must use this specific edition — bring it to the test center. Study from it. Know where everything lives in it.

To get the most out of your open-book advantage, prep your reference before exam day:

Tab it. Use Redi-Tag Permanent Colored Tabs to mark every major section. You get 100 laser tabs in five colors — use a color-coding system by topic. Purple for lien law, green for contracts, orange for taxes, and so on. When the clock is running, you'll flip straight to what you need instead of hunting page by page.

Highlight it. Sharpie Tank Highlighters are built for this. Bright fluorescent ink on a chisel tip — you can highlight key definitions, circle deadlines, and underline formulas without making a mess. The pack includes 12 in assorted colors, so you can color-code your highlights to match your tabs. Just let the ink dry before you flip the page.

Do this prep work at home, not at the test center. The rules allow highlighting, underlining, and permanent tabs — but you cannot write in the book during the exam. Set it up right beforehand.

Study Tips

Use timed practice. Our practice exam mirrors the real PSI format — same number of questions, same time limit, same topic mix. Practicing timed means no surprises on test day. A PDF study guide won't train you to manage 140 minutes. Timed practice will.

Don't look for answer patterns. There's no hidden pattern in the answer key. If you've picked "A" four times in a row, the fifth answer can still be "A." Read each question on its own and make your call based on the content.

Weight your prep by exam weight. Estimating and Bidding and Business Organization and Financial Management are each worth 7 items. Spend proportionally more time there than on Risk Management (4 items).

Know the Tennessee-specific numbers cold. The $25,000 contracting threshold. Lien filing deadlines (1 year / 90 days). Notice of completion windows (10 days residential, 30 days commercial). These facts are testable and specific to Tennessee.

Tab before you walk in. Pre-tab every chapter and every major topic. The open-book advantage only works if you can find the answer in under 30 seconds.

Frequently Asked Questions

How much does the Tennessee Business and Law Management Examination cost?
The exam fee is $57. Fees are not refundable or transferable. If you don't test within one year of PSI receiving your fee, you forfeit it.

How many questions are on the exam and how long do I have?
50 scored questions, 140 minutes to complete them.

What score do I need to pass?
73% — that's 37 out of 50 questions correct.

How do I register?
Online through the exam registration page, or by calling PSI at (855) 868-1882. Phone registration is available Monday–Friday 6:30 am–9:00 pm CT, and Saturday–Sunday 8:00 am–4:30 pm CT.

Is the exam open book?
Yes. The only approved reference is the Contractors' Guide to Business, Law and Project Management – Tennessee Edition, 4th Edition published by NASCLA.

Can I write in my reference book during the exam?
No. You can highlight, underline, and use permanent tabs — all of which must be done before you arrive. Writing in the book during the exam will get you reported to the Board.

Can I use a calculator?
Yes. You can bring a silent, battery-operated, non-programmable calculator without paper tape printing or an alphabetic keyboard.

What ID do I need?
One valid, unexpired, government-issued photo ID with your signature — a state driver's license, state ID, U.S. passport, U.S. military ID, U.S. Alien Registration Card, or Canadian government-issued ID. Paper or temporary ID versions are not accepted.

How soon can I retake the exam if I fail?
You can't schedule a new appointment on the same day you tested. A candidate who tests on a Monday can call Tuesday and potentially retest as early as Wednesday, depending on availability.

What topics does the exam cover?
Nine areas: Licensing Requirements, Estimating and Bidding, Business Organization and Financial Management, Tax Laws, Labor Laws, Project Management and Lien Law, Contracts, Risk Management, and Environmental and Safety. Full details are available at the state licensing website.

Start Preparing Now

The Tennessee Business and Law exam is required for every Tennessee contractor license classification. It's not optional, and it's not waived even if your trade exam is NASCLA-accredited. The good news: 50 questions, open book, and a well-organized reference gets you a long way.

Our courses pair Business & Law prep with your trade exam preparation, so you're building both at the same time — the way Tennessee contractor candidates actually need to study.

Start with the free practice exam — 10 questions, no account needed, no cost. Get a feel for the format and find out which topics need the most work. Then move to the full practice exam for complete coverage across all 267 questions, timed and scored by topic.

Get your tabs in, get your highlights in, and know those Tennessee-specific numbers. You've got this.