CSLB CONTRACTORS LAW AND BUSINESS
2026 LICENSING ASSESSMENT
QUESTIONS SOLUTIONS FINAL STUDY
GUIDE
◉ Which business entity allows its owners to report income as
personal income while enjoying limited liability?
Answer: LLC
◉ What is the purpose of a mechanics lien
Answer: To ensure payment for labor or materials used in a project.
◉ What financial statement summarizes a company's assets,
liabilities, and equity.
Answer: Balance sheet
◉ What is the penalty for failing to secure workers' compensation
insurance for employees?
Answer: Stop order to halt all work, fines up to $100,000, and
misdemeanor criminal charges.
, ◉ Under California law, how long does a homeowner have to cancel
a home improvement contract if they are over 65 years old?
Answer: 5 "business" days without penalty or obligation.
◉ How often must a contractor renew their license in California?
Answer: Every 2 years.
◉ What type of insurance is mandatory for all limited liability
companies (LLCs) in California?
Answer: Commercial general liability insurance valued at $1 million
dollars.
◉ What is the monetary fine for an unlicensed contractor acting as a
contractor in California?
Answer: $200 and up to $15,000
◉ What must a contractor disclose to a homeowner if they do not
carry commercial general liability insurance?
Answer: They must notify the homeowner in writing.
◉ How many classifications of contractor's licenses does CSULB
regulate
Answer: Over 40
2026 LICENSING ASSESSMENT
QUESTIONS SOLUTIONS FINAL STUDY
GUIDE
◉ Which business entity allows its owners to report income as
personal income while enjoying limited liability?
Answer: LLC
◉ What is the purpose of a mechanics lien
Answer: To ensure payment for labor or materials used in a project.
◉ What financial statement summarizes a company's assets,
liabilities, and equity.
Answer: Balance sheet
◉ What is the penalty for failing to secure workers' compensation
insurance for employees?
Answer: Stop order to halt all work, fines up to $100,000, and
misdemeanor criminal charges.
, ◉ Under California law, how long does a homeowner have to cancel
a home improvement contract if they are over 65 years old?
Answer: 5 "business" days without penalty or obligation.
◉ How often must a contractor renew their license in California?
Answer: Every 2 years.
◉ What type of insurance is mandatory for all limited liability
companies (LLCs) in California?
Answer: Commercial general liability insurance valued at $1 million
dollars.
◉ What is the monetary fine for an unlicensed contractor acting as a
contractor in California?
Answer: $200 and up to $15,000
◉ What must a contractor disclose to a homeowner if they do not
carry commercial general liability insurance?
Answer: They must notify the homeowner in writing.
◉ How many classifications of contractor's licenses does CSULB
regulate
Answer: Over 40
