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Contractor's State License > Law > Flashcards

Law Flashcards

(105 cards)

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1
Q

Mechanics Lien

A

A claim, like a mortgage or home equity loan, made against the property and recorded with the county recorder

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2
Q

The Preliminary Notice

A

Can be sent up to 20 days after the subcontractor starts work or the supplier provides material. The prime contractor and laborers do not send 20-Day Preliminary Notices; contractor law assumes the property owner already knows they are improving the property

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3
Q

Limited Liability Company (LLC)

A

Offers liability protection similar to that of a corporation but is taxed differently

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4
Q

Taxes & Permits

A

If the business is a sole ownership or partnership, estimated federal & state income taxes must be prepaid or paid quarterly

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5
Q

Performance Bonds

A

Guarantee the projects completion according to the building plans & specs. If the job is abandoned on the work unacceptable, the bonding company has the option of hiring another contractor to complete the work or settling for damages

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6
Q

Payment Bonds

A

Assures the owner that no liens for labor & materials will be filed against the property

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7
Q

Contract bonds

A

Guarantee both job completion & payment of all labor & materials

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8
Q

Contractor License Bonds

A

Each licensed contractor is required to carry a contractor bond; written to cover any project the contractor agrees to perform; penal sum is $12,500

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9
Q

Commercial General Liability Insurance (CGL)

A

Protects the insured contractor from liability to members of the public (other than employees) for bodily injury, property damage, or personal injury caused by virtually any activity

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10
Q

Under CGL, home improvement contractors must…

A

Disclose in writing whether they carry commercial general liability insurance

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11
Q

If contractors do carry CGL insurance, the contractors are required to…

A

provide the homeowner w/ name and # of the insurance company

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12
Q

Cash Basis of Accounting

A

Revenue is recognized when cash is actually or constructively received & expenses are deductible in the year paid (unless they should be taken in a different period in order to clearly reflect income

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13
Q

When to use Cash Basis of Accounting

A

A cash basis of accounting may be appropriate where no prepaid expense (e.g. insurance, rent), depreciable assets or inventories exist & where revenue is received during the accounting period

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14
Q

Accrual Basis of Accounting

A

Recognizes revenues when earned and expenses when incurred, regardless of when payment is received or made

  • Accounts receivable is any money your customer owes you for goods or services they purchased from you in the past
  • Accounts payable on the other hand are a liability account representing money that you owe another business
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15
Q

The percentage of completion (accounting)

A

Reports profits & losses regularly on the basis of actual work accomplished on each job

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16
Q

Current Liabilities

A

This item includes debts of the company that become due within one year of the balance sheet date
- Current assets are the source from which these payments are usually made

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17
Q

Cash

A

Immediately available or liquid funds

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18
Q

Retention

A

A specified Amt, usually 10%, withheld from progress payments to the contractor pending satisfactory completion & final acceptance of the project. This art you have already earned even though you have not been paid yet

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19
Q

Accounts Receivable

A

The Amt due from customers in payment for construction companies

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20
Q

Inventory

A

Includes all materials, labor, and direct and indirect overhead on jobs currently in progress

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21
Q

Prepaid Expenses

A

Goods or services the company buys and pays before use e.g. are insurance premiums and office supplies

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22
Q

Stockholder’s Equity

A

Also called net worth or equity, represents the claim of the owners on the assets of business

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23
Q

Capital Stock

A

The total Amt invested in the business by the contractor in exchange for shares of common stock at par value

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24
Q

Retained Earnings

A

Total corporation earnings from its beginning, minus the total dividends declared ( distribution to owners) since the corporation was founded. In other words, RE is the amount of net income left over for the business after it has paid out dividends to its shareholders

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25
Two main aspects of financial analysis
- Comparison of current financial statements is ratio analysis within the current financial data is called a ratio - Compare the current financial data with that of other businesses within the same industry
26
Ratio analysis
The relationship b/w any two figures w/i the current financial data is called a ratio
27
Current Ratio
The difference b/w total current assets & the total current liabilities
28
Quick Ratio
The quick ratio is another, more conservative way of testing the adequacy of the current liquidity of the company
29
Character
Includes experience w/ similar jobs & locations; business reputation w/ lenders suppliers, & subcontractor
30
Capacity
Requires an evaluation of current workload, availability of equipment & financial resources available
31
Certainty
Are the completion dates realistic?
32
Common pitfalls that can be avoided include...
- Bidding on projects for which the plans & specs are not completely understood - Insufficient planning so that hurried analysis becomes necessary - Overextension of the managerial &/or financial resources of the company - Bidding against the competition & not the job
33
Lien Foreclosure Action
Is a lawsuit to foreclose the mechanics lien
34
Lis Pendens
Is a notice that a lawsuit is pending & that the lawsuit affects real property. It warns everyone who might acquire the property that he or she may be bound by an address judgement
35
Notice of Cessation
- Apprx. date when labor on the job has stopped - Confirmation that no further labor has been performed since the recording of the notice - Name & address of the owner - Nature of the interest or estate or estate of the owner Street address of the site - Name of the original contractor, if any, for the work of improvement
36
CAL/OSHA poster, Safety & Health Protection on the job
Each construction contractor is required to post at least one copy of this poster
37
Inactive license must be renewed every...
4 years
38
When you get an approved set of plans for the building department ...
Read any notes
39
Excessive Amt of change orders?
Arrange for the owner to put funds into an escrow account of funding control company that will insure payment for each change order that is properly executed
40
Warranty will cover defects after how many years?
After completion
41
Arbitration`
The use of an arbiter to settle a dispute
42
In most construction contracts, the retention may be held up for how many days...
60 days as a guarantee that the prime pays the sub & suppliers
43
Before you initiate the inspection process with the building department you should...
Clean the job site
44
All work on a project has been completed. A copy of the final inspection report is given to whom?
The county assessor
45
Which of the following is the best means to insure that funds are readily available for a job?
Check for cost over-runs (a means of looking for missing money that could be used on a job in an efficient manner)
46
Standard contractor's insurance policy covers...
job materials & damage from vandalism/environmental
47
The contractor's income taxes are based on...
net profit (represents all sales minus expenses) whereas, gross profit is figured before overhead
48
Who must appear on an application for a building permit
Only the contractor's name
49
When should the attorney see the contract
After the contract is prepared but before you sign it
50
A notice cancelling a home solicitation contract becomes effective...
When the written notice is deposited in the mail
51
Joint control addendum must be sign by...
Owner, contractor & joint control officer
52
Surety Bonds
Required in order to obtain a contractor's license # (Bonds do not cover damage)
53
Contractor's Bond
- Any client damaged as a result of regulation violation by the contractor - Any person damaged due to fraud on the part of the contractor - Any employee damaged by the contractor's failure to pay wages
54
Eligible to receive benefits from a contractor's license bond?
- A customer who was defrauded by the contractor - An employee who was not paid wages that were due - A homeowner w/ a valid claim that the contractor abandoned the job
55
Maintenance Bond
Guarantees that a contractor's work will be free of defects in materials & workmanship for a specific period of time
56
Where do you obtain a surety bond?
From an Insurance Agent; bonds are available through Construction Insurance Agency at any of their schools
57
When do you have to renew a contractor's license before it expires?
30 days
58
If a contractor forgets to renew his or her license on time, the expired license may be renewed anytime w/i how many years?
5 years after the expiration date w/o reapplying for a license & fulfilling the exam
59
Appeal of a Citation
Any license or applicant served with a citation may appeal to the Registrar w/i 15 days from service of the citation
60
A prime contractor who does not pay his subs a "Progress Payment" w/i how many days, is subject to disciplinary action
7 days
61
Failure to keep records at least ___ years is a cause for disciplinary action
5 years
62
Owner shall pay contractor the fixed sum of ___ permissible delays
10
63
Business licenses are obtained by the ___
County or City Clerk
64
Purpose of the Contractor's Bond
Protect the customer or employers of the contractor; should the contractor not complete his work or pay his employees
65
A home solicitation constitutes a contract of ____ or more
$25 or more
66
W/i ___ days after a home solicitation contract has been cancelled, the seller must give to the buyer any payments made thus far
10 days
67
If no Notice of Completion or Notice of Cessation is filed, the sub & prime contractors have ___ days to file Stop Notices & or liens
90 days
68
To claim a lien it is necessary to file a Lien Foreclosure Action w/i ___ days of recording the Claim of Lien
90 days
69
W-4
Used to indicate the exact amount of FIT tax to withhold
70
Require the subcontractor to complete a form ___ on which the individual must provide a social security number
W-9
71
If the subcontractor does not provide a taxpayer ID#, you must withhold ___% of the payment of income tax
20%
72
An employer must file form ____ to report payments of $600 or more per calendar year to persons not treated as employees
1099-MISC
73
True or false: health insurance for employees is an option
True
74
Contractors report & pay sales tax to the ____
Board of Equalization
75
An employer w/ __ or less employees is not required to maintain an annual record of work related injuries & illnesses
10
76
The employer must post a summary record of job-related injuries in a conspicuous place for how long?
Once a year
77
CAL/OSHA specifies that a minimum of one toilet shall be provided for __ workers at a job site
20 workers
78
Except in an emergency, you must notify the regional Underground Service Alert Notification Center no less than __ days before nor more than ___ days before starting excavation work
within 2 to 14 days before
79
A contractor must retain records of employees subject to hazardous material for ___ years
30 years
80
Removing Asbestos
- Protective clothing & a respirator should be worn - Floors, walls, windows, & doors should be sealed w/ double layer of 6 mil plastic sheeting - The asbestos-containing materials should be wetted
81
Type A Fire Extinguisher
Wood/Cloth
82
Type B Fire Extinguisher
Flammable liquid
83
Type C Fire Extinguisher
Electric
84
Type D Fire Extinguisher
Metal
85
Best way to get start-up capital is to obtain a conventional loan from a bank & make monthly payments in order to establish ___ w/ suppliers and obtain ___ funds from investors
Credit and equity
86
Debits are ___ and credits are ___
added; subtracted
87
At the end of each month, data is posted from the bookkeeping journals to the ____
General Ledger
88
A contractor should incorporate his chart of accounts into his ____
Journal & Ledger
89
Contractor's deal w/ numerous forms, files, & reports. What is the min. length of time that a contractor SHALL keep a building report in his/her files?
5 years
90
Why is net worth important?
It represents the amount of money the owner has invested in the company as well as the profits the company has retained. It tells how much of the company's assets belong to the owner
91
Net worth
Is equity ownership which is made up of money invested & profits retained; a claim of the owner on the assets of the business
92
Income statement
Profit & Loss statement
93
How often should income statements be prepared?
Whenever you want to review your profit and losses
94
Direct costs are charged directly to the ___
Job site
95
Labor costs are determined by ...
Gross wages, payroll taxes, health & welfare benefits, insurance, & vacation
96
Direct labor is comprised of ...
Actual cost of labor payroll
97
Why is Overhead important?
B/c it represents the amount of money it costs to run a company & is important in determining accurate bids
98
Income statement vs. Balance sheet
The income statement indicates income over a period of time, while the balance sheet indicates equity at a specific point of time
99
Depreciation is shown on the balance sheet in the ...
fixed asset section
100
Depreciation is shown on an income statement as an ...
Expense statement & it reduces taxable income
101
Bill in a timely manner on a simple, itemized for & require payment in ___ days
30 days
102
2%, 10; net 15
A 2 % discount is given if the bill is paid by the 10th, otherwise the bill is paid in full by the 15th
103
What if the client doesn't make payment on time?
Send a follow-up letter to owner, alone with another bill
104
Customer's account has gone past 30 days?
Begin to charge interest on the customer's account
105
Major reason for business failures is...
lack of cash flow

Contractor's State License (2 decks)

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