CSLB Law & Business Exam Study Guide (2026)
Everything the California CSLB Law & Business Exam tests, topic by topic: what each section covers, the facts that come up most, and how to study it. Pair it with the free 15-question practice test.
The exam at a glance
| Questions | About 115 multiple-choice questions |
|---|---|
| Time | About 3.5 hours |
| Passing score | Set by CSLB per exam form (plan for 70%+) |
| Format | Closed book |
| Licensing body | Contractors State License Board (CSLB) |
| Test provider | PSI |
Mind map: the whole exam on one screen
1. Licensing and the CSLB
This topic covers who needs a contractor license, how a license is qualified and kept, and what happens to people who contract without one. It is the largest single area of the exam because every other rule assumes you hold a valid license.
Key facts
- A license is required for any job of $1,000 or more in combined labor and materials. Below $1,000 is exempt only if no building permit is needed and no one is hired to help (B&P Code §7048, as amended by AB 2622, effective January 1, 2025).
- Applicants need at least 4 years of journey-level, foreman, supervisor or contractor experience within the last 10 years (B&P Code §7068; 16 CCR §825).
- When a qualifier (RME or RMO) leaves, the licensee must notify CSLB and replace the qualifier within 90 days or the license is suspended (B&P Code §7068.2).
- Licensees must report any change to recorded information, such as address, personnel or business name, in writing within 90 days (B&P Code §7083).
- Active licenses expire every 2 years. Inactive licenses expire every 4 years, and an inactive licensee may not bid or contract (CSLB).
- A first offense for contracting without a license is a misdemeanor: up to $5,000, up to 6 months in county jail, or both (B&P Code §7028).
- An unlicensed person cannot sue to collect payment for work that requires a license (B&P Code §7031).
Flashcards
Exam tip: The minor work exemption is now $1,000, not the old $500, and it disappears if the job needs a permit or the person hires any help.
2. Home Improvement Contracts
Home improvement rules protect homeowners from deposit scams and pressure sales. The exam tests the written contract requirement, down payment limits, progress payments and cancellation rights, often with dollar math.
Key facts
- A home improvement contract must be in writing when the aggregate contract price exceeds $500 (B&P Code §7151.2 and §7159).
- The down payment may not exceed $1,000 or 10% of the contract price, whichever is less (B&P Code §7159.5(a)(3)).
- Except for the down payment, the contractor may not request or accept payment that exceeds the value of work performed or material delivered (B&P Code §7159.5(a)(5)).
- Every change order must be in writing and signed by both parties before the changed work is performed (B&P Code §7159(d)).
- For a home solicitation contract, the buyer may cancel until midnight of the third business day after signing (Civil Code §1689.6).
- A buyer who is 65 or older gets 5 business days to cancel, for contracts entered on or after January 1, 2021 (Civil Code §1689.6 and §1689.7; AB 2471).
- Until the seller gives the required cancellation notice, the buyer may cancel the home solicitation contract at any time (Civil Code §1689.7(g)).
Flashcards
Exam tip: For down payment questions, compute 10% first and compare it to $1,000: the smaller number is always the legal maximum.
3. Mechanics Liens and Payment
Mechanics liens let unpaid contractors, subcontractors and suppliers secure payment against the property they improved. Questions focus on notice deadlines, recording deadlines and prompt payment rules, so memorize the day counts.
Key facts
- A preliminary notice must be given no later than 20 days after the claimant first furnishes work. If late, lien rights cover only work done within 20 days before the notice and after (Civil Code §8204).
- A direct contractor must record a lien within 90 days after completion, or within 60 days after a notice of completion or cessation is recorded, whichever is earlier (Civil Code §8412).
- A subcontractor or supplier must record within 90 days after completion, or within 30 days after a notice of completion or cessation is recorded, whichever is earlier (Civil Code §8414).
- The owner may record a notice of completion within 15 days after the date of completion (Civil Code §8182).
- Completion includes actual completion, owner use plus cessation of labor, 60 days of continuous cessation, or a recorded notice of cessation after 30 days of cessation (Civil Code §8180).
- A lawsuit to enforce a lien must be filed within 90 days after the lien is recorded, or the lien becomes unenforceable (Civil Code §8460).
- A contractor must pay subcontractors within 7 days after receiving each progress payment, unless agreed otherwise in writing. The penalty is 2% of the amount due per month (B&P Code §7108.5).
Flashcards
Exam tip: Do not mix up 60 and 30: the direct contractor gets 60 days after a notice of completion, everyone else gets 30.
Test yourself on these topics
Take the free 15-question CSLB Law & Business test, then save your results to unlock your Readiness Score and the mistakes bank.
4. Bonds, Insurance, Workers' Comp
This topic covers the bonds and insurance CSLB requires before a license is issued or renewed. Expect questions on bond amounts, when a qualifier bond applies, LLC requirements and which classifications must carry workers' compensation.
Key facts
- Every active license needs a $25,000 contractor bond. The amount rose from $15,000 on January 1, 2023 (B&P Code §7071.6; SB 607).
- A $25,000 Bond of Qualifying Individual is required when the qualifier is an RME, or an RMO who owns less than 10% of the voting stock (B&P Code §7071.9).
Flashcards
Exam tip: An inactive license needs no contractor bond, qualifier bond or workers' comp on file, so watch for questions that hinge on license status.
5. Employment Law and Payroll
Contractors with employees must follow California wage and hour law and file payroll taxes. The exam uses overtime math, final paycheck deadlines and new hire reporting, so practice the calculations.
Key facts
- The California minimum wage is $16.90 per hour for all employers in 2026 (Labor Code §1182.12; DIR).
- Overtime is 1.5 times the regular rate for hours over 8 in a day or 40 in a week, and for the first 8 hours on the seventh consecutive day (Labor Code §510).
Flashcards
Exam tip: California figures overtime by the day as well as the week, so a 10 hour day earns 2 overtime hours even in a 30 hour week.
6. Cal/OSHA Safety Requirements
Cal/OSHA sets workplace safety rules for California employers, and they are often stricter than federal OSHA. The exam tests written program requirements, reporting deadlines, permit triggers and fall protection heights.
Key facts
- Every employer must have an effective written Injury and Illness Prevention Program (IIPP) (8 CCR §3203).
- Construction employers must hold toolbox or tailgate safety meetings at least every 10 working days (8 CCR §1509(e)).
Flashcards
Exam tip: Federal OSHA allows 24 hours to report a hospitalization, but Cal/OSHA allows only 8 hours, so pick the California number.
7. Business Finance and Estimating
This topic covers pricing, markup, margin, basic financial ratios and record keeping. Most questions are short calculations, so know the formulas cold and watch the difference between markup and margin.
Key facts
- Markup is based on cost: Price = Cost x (1 + markup %). A 25% markup on $80,000 gives a $100,000 price.
- Margin is based on selling price: Price = Cost / (1 - margin %). A 20% margin on $60,000 cost gives a $75,000 price.
Flashcards
Exam tip: If a question gives a margin, divide cost by (1 minus margin); multiplying by (1 plus margin) is the most common wrong answer.
How to pass
- Closed book: build flashcards for every dollar figure and day count.
- Watch for 2025 changes: the minor-work exemption is now under $1,000, not $500.
- Home improvement rules (down payment, right to cancel, required notices) are heavily tested.
- Lien deadlines depend on whether a notice of completion was recorded. Learn both paths.
Frequently asked questions
How long should I study for the CSLB Law & Business exam?
Most working candidates need 4 to 8 weeks at 45 to 60 minutes a day. Book your exam once your Readiness Score has stayed at 80 or higher for about a week.
Is the CSLB Law & Business exam open book?
Closed book. Check the current candidate information bulletin from Contractors State License Board (CSLB) for the approved reference list and tabbing rules.
What score do I need to pass the CSLB Law & Business exam?
Set by CSLB per exam form (plan for 70%+). The exam has about 115 multiple-choice questions and a time limit of about 3.5 hours.
What are the most tested topics?
The outline covers licensing and the cslb, home improvement contracts, mechanics liens and payment, bonds, insurance, workers' comp, employment law and payroll, cal/osha safety requirements, business finance and estimating. Use the free practice test to see which ones you need most.
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Summarized from official candidate information and the statutes, codes and regulations cited, checked October 2026. Confirm current requirements with Contractors State License Board (CSLB).