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A Comprehensive Guide to California's Law and Business Exam
If you’re planning to become a licensed contractor in California, passing the CSLB Law and Business Exam is a required step. Every applicant, no matter their trade, must pass this exam in addition to their specific trade or classification test.
The Law and Business Exam is designed and overseen by the Contractors State License Board (CSLB), the agency responsible for regulating contractors in California.
While the CSLB handles the exam process, you’ll actually take the test at a PSI testing center, which has locations throughout the state.
This guide walks you through everything you need to know about the exam—from what’s on it to how to prepare—so you can go in with confidence and come out one step closer to getting your license.
Who is this Guide For?
This guide is for anyone who needs to take the California Law and Business Exam as part of getting their contractor license. That includes:
- First-time applicants who are new to the construction industry in California
- Experienced tradespeople who are ready to get licensed and start their own business
- Out-of-state contractors who want to legally operate in California
- Journeymen or foremen moving up to become licensed contractors
Whether you’re just starting your journey or making a move from another state, this guide will help you understand exactly what the CSLB Law and Business Exam is, what to expect, and how to pass it the first time.
CSLB Law and Business Exam Structure, Content, and Scoring
The CSLB Law and Business Exam is a standardized, multiple-choice test that every contractor applicant in California must pass. It’s designed to confirm that you understand the legal and financial responsibilities that come with holding a contractor license.
Where and How You'll Take the Exam
This exam is taken at a PSI testing center, not through the CSLB directly. PSI has locations across California, and you’ll schedule your test after your application is accepted.
The exam is entirely computer-based. You’ll sit at a workstation with a screen, and questions will appear one at a time. You’ll have access to a built-in calculator for math questions, and a small tablet with a stylus for taking notes.
Californias Law and Business Exam Format
Most versions of the CSLB Law and Business Exam contain around 115 multiple-choice questions. While the number can vary slightly depending on the test form, you can expect the exam to follow a consistent structure.
You’ll have three and a half hours (3.5 hours) to complete the test. That’s more than enough time for most people. In fact, many finish in about 90 minutes to two hours. Still, you’ll want to pace yourself and avoid rushing through.
Each question offers four answer choices. Some options may seem partly correct, but there is always one best and most accurate answer. This format is designed to test not just surface knowledge, but also your judgment and understanding of real-world contractor responsibilities.
How the Exam is Scored
To pass the CSLB Law and Business Exam, you need a minimum score of 65%. That means you’ll need to correctly answer roughly 75 of the 115 questions, though the exact scoring may vary slightly by exam version.
After you complete the test, your results will be displayed immediately. If you pass, you’ll see a simple “Pass” message, but you won’t be told your exact score. If you don’t pass, your actual score will be shown so you can better prepare for a retake.
This gives you time to review the areas where you struggled and come back better prepared. You’ll also need to pay a fee each time you reschedule the exam, so it's best to study thoroughly and aim to pass on the first or second try.
Key Topics Covered on the CSLB Law and Business Exam
The exam questions are randomly mixed but pulled from seven main topic categories, each focusing on a crucial area of running a construction business in California. Here’s a brief look at what you’ll be tested on:
Seven Core Exam Topics
Business Organization and Licensing
This section covers the legal and structural foundations of a contracting business in California. You’ll be tested on business entity types like sole proprietorships, LLCs, and corporations, as well as the roles of the Qualifying Individual (QI), Responsible Managing Employees (RMEs), and Responsible Managing Officers (RMOs). It also includes regulations related to advertising, subcontractor relationships, and CSLB licensing classifications.
Approximately 13% of the exam — about 15 questions.
Business Finances
This topic addresses the core financial and tax responsibilities of running a compliant contracting business. You’ll encounter questions on tax law, federal and state tax forms, accounting principles, financial reporting obligations, and methods for cash flow management and strategic business planning.
Approximately 15% of the exam — about 17 questions.
Employment Requirements
This area focuses on labor law and employment regulations in California. Expect questions on legally compliant hiring and termination practices, payroll processing, recordkeeping obligations, wage classifications, and employer responsibilities under state and federal labor codes.
Approximately 20% of the exam — about 23 questions.
Insurance, Bonds, and Liens
This section tests your understanding of business risk management and legal remedies in payment disputes. Topics include worker’s compensation insurance, general liability coverage, contractor bonding requirements, and legal tools such as mechanics liens and stop payment notices used to secure payment on construction projects.
Approximately 12% of the exam — about 14 questions.
Contract Requirements and Execution
This is the most extensive and detailed portion of the exam. It covers legal requirements for different contract types, including home improvement contracts and service & repair agreements, cancellation rights, and mandatory disclosures. You’ll also see questions about bid preparation, change orders, estimating procedures, payment scheduling, and contract administration from start to finish.
Approximately 21% of the exam — about 24 questions.
Public Works
This section focuses on the specialized rules that govern public agency construction work. Questions will cover prevailing wage laws, apprenticeship program standards, bonding and insurance requirements for public contracts, and procedures for bidding on government-funded projects.
Approximately 5% of the exam — about 6 questions.
Safety
This portion evaluates your knowledge of jobsite safety regulations and compliance with CAL/OSHA standards. Topics include safety training requirements, injury reporting, hazard documentation, asbestos and lead handling protocols, recordkeeping rules, and developing emergency and site-specific safety plans.
Approximately 14% of the exam — about 16 questions.
How to Schedule the CSLB Law and Business Exam
Before you can take the CSLB Law and Business Exam, you need to submit your license application to the Contractors State License Board. Once your application is reviewed and approved, you’ll receive an official notice from the CSLB with instructions on how to schedule your exam through PSI, the third-party testing service.
PSI has testing centers throughout California, and you’ll be able to choose your preferred location and available time slot directly through their online system.
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Pro Tip: Schedule Your Exam Right Away
As soon as you get your exam scheduling notice, book your test date immediately—even if you’re not fully ready to take it yet.
PSI testing centers often fill up weeks or even months in advance, especially in high-demand areas. By locking in your date early, you can create a focused study timeline and avoid unnecessary delays.
What you don’t want is to feel ready, only to realize you now have to wait 6–8 weeks for an open spot. That creates stress, forces you to review material again, and can throw off your momentum.
How to Prepare for the CSLB Law and Business Exam
Passing the CSLB Law and Business Exam requires more than just casual review. This is a difficult and technical exam designed to ensure you fully understand the legal, financial, and administrative responsibilities of running a contracting business in California.
If you’re not intimately familiar with the topics we covered above — including contracts, employment law, safety rules, insurance, public works regulations, and more — you likely won’t pass. Fortunately, with the right approach and resources, you can prepare with confidence.
Create a Structured Study Plan
The first step is to set a clear study schedule. Once you’ve submitted your application and know you’re eligible to test, start building a realistic timeline between now and your scheduled exam date.
Your plan should cover:
- All seven exam topic areas
- Time to review multiple times, not just once
- Daily or weekly study sessions – not just cramming the week before!
This plan keeps you focused and helps avoid burnout. It also ensures you’re not blindsided by difficult sections you may have overlooked early on.
Use High-Quality Study Resources
You don’t want to rely on scattered PDFs or outdated guides. The CSLB Law and Business Exam is updated regularly, and the content is too technical to guess your way through.
There are dedicated prep courses (like the one we offer) that walk you through every topic, explain legal language in simple terms, and include practice exams to test your progress.
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Features
- 90+ lessons
- 30 In Depth Videos
- 800+ Practice Problems & Explanations
- 28 Quizzes + 10 Simulation Exams
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Inside the Course
Introduction
Business Organization and Licensing
Business Finances
- Cash Management
- QUIZ: Cash Management
- Budget and Planning
- QUIZ: Budget and Planning
- Taxes
- QUIZ: Taxes
- Bonus Item: Tax Deadline Reference Sheet
- Financial Reporting
- Examples of Financial Documents
- QUIZ: Financial Reporting
Employment Requirements
- Hiring Employees
- QUIZ: Hiring Employees
- Supervising and Training Employees
- QUIZ: Supervising and Training Employees
- Evaluation and Record Keeping
- QUIZ: Evaluation and Record Keeping
- Payroll
- QUIZ: Payroll
First Half Assessment
- Mid Course Review
- Mid Course Exam
Insurance, Bonds, and Liens
- Workers Compensation Insurance
- Quiz: Workers Compensation Insurance
- Business Insurance
- Bonus Items: Business Insurance Cheat Sheet
- Quiz: Business Insurance
- Bonds
- Bonus Items: Bonds Cheat Sheet
- Quiz: Bonds
- Mechanics Lien
- Quiz: Mechanics Lien
- Stop Payment Notices
- Quiz: Stop Payment Notices
Contract Requirements and Execution
- Bidding & Estimating
- Quiz: Bidding and Estimating
- Cost Control
- Quiz: Cost Control
- Contracts and Arbitration
- Quiz: Contracts and Arbitration
- Home Improvement Contracts
- Quiz: Home Improvement Contracts
- Service and Repair Contracts
- Quiz: Service and Repair Contracts
- Contract Examples
Public Works
- Public Works Projects
- Quiz: Public Works Projects
Safety
- General Safety
- Quiz: General Safety
- Training and Reporting Requirements
- Quiz: Training and Reporting Requirements
- Hazardous / Unknown Material
- Quiz: Hazardous / Unknown Material
- BONUS: 52 Toolbox Safety Talks & Pre-Task Plan Template
Second Half Assessment
- Second Half Review
- Second Half Exam
Getting Test Ready
- Test Taking Strategies
- Wild Card Quiz Overview
- Wild Card Quiz
- Exam Day Checklist
- Short 3 Question Survey
- Review the Course
Simulation Exams
- Simulation Exams Overview
- Simulation Exam 1
- Simulation Exam 2
- Simulation Exam 3
- Simulation Exam 4
- Simulation Exam 5
- Simulation Exam 6
- Simulation Exam 7
- Simulation Exam 8
- Simulation Exam 9
- Simulation Exam 10
Take Practice Exams — Often
Practice law and business exams are one of the most powerful tools in your prep strategy. They give you:
- A realistic feel for how the actual test will look
- An early warning about areas you’re struggling with
- A way to track whether you’re actually ready to pass
We recommend aiming to score at least 75% consistently on your CSLB practice tests before scheduling your exam. That gives you a buffer above the 65% passing threshold and confirms you’re not just guessing your way through.
You should also:
- Take full-length practice exams under timed conditions
- Review not just what you got wrong, but why
- Practice questions in all topic areas – especially the ones you’re weaker in
Study Around Your Scheduled Exam Date
Once your CSLB application is accepted, you’ll be able to schedule your test through PSI. Book the earliest available date that gives you enough time to study — but don’t wait too long or you risk losing momentum.
After scheduling, reverse-engineer your study plan around your exam date. For example:
- Have your prep course finished 1-2 weeks before the test
- Leave the final week for review and practice tests only
- Identify weak spots early so you can reinforce them
Remember: your practice test scores are your benchmark. If you can’t score in the passing range during practice, you won’t pass the real CA law and business exam!
CSLB Law and Business Exam Day Tips
How you handle the day of your exam can have just as much impact as the studying you’ve done. Showing up tired, forgetting your ID, or arriving late can throw you off before the test even begins. In this section, you’ll learn what to bring, how to get ready, and smart strategies to help you stay focused and in control during the exam.
The Night Before the Exam Matters
Start preparing the night before your exam. Getting a full night of sleep — ideally eight hours — is one of the most important things you can do. The CSLB Law and Business test is long and mentally demanding, and being well rested helps you stay focused and calm under pressure.
Avoid alcohol or anything else that might interfere with your sleep, even if you think you’ll be fine the next day.
What to Bring and How to Show Up Ready
On the morning of the test, eat a full, healthy breakfast. Snacks and drinks are not allowed in the testing room, so you won’t have a chance to refuel once the exam starts. Staying full and hydrated ahead of time keeps you from being distracted during the CA Law and Business exam.
Before leaving home, make sure you have your valid photo ID — a driver’s license or other government-issued form of ID. It must be current and not expired. PSI testing centers strictly enforce this policy and will not make exceptions.
Arrive at the test center at least 30 minutes early. It gives you breathing room in case of traffic or check-in delays, and some locations may even let you begin ahead of schedule.
CA Law and Business Exam Test Strategy
Once the exam begins, focus on staying calm and methodical. With 115 multiple-choice questions and three and a half hours to complete them, time shouldn’t be a problem if you manage your pace. The best strategy is to start by answering the questions you know without hesitation. If a question trips you up, mark it for review and come back later — this keeps your momentum steady and avoids unnecessary stress early in the test.
As you go through the exam, make sure you read every answer choice thoroughly. Some questions may offer more than one answer that seems reasonable.
But remember, the CSLB exam is designed with only one most correct answer. This means while two or more options might appear valid, your job is to pick the one that is most accurate, most complete, or best fits the situation described.
If you're unsure of a question, follow a simple and effective process:
- Eliminate any clearly wrong answers first. Narrowing it down increases your chances even if you have to guess.
- Evaluate the remaining options carefully. If one stands out to you — go with it. Your first instinct is often right, especially if you’ve studied well.
- Still stuck? Choose the longest answer of the remaining options. On standardized exams like this, the longest answer often includes more detailed context and tends to be the most accurate choice.
Once you’ve answered all the questions, revisit those you marked. Slow down and look for details you may have missed the first time around. A small word or phrase can completely change the meaning of the question or steer you toward the right answer.
With a calm mindset and a clear strategy, you’ll be better equipped to navigate even the toughest questions on the exam.
Frequently Asked Questions (FAQ)
What is the CSLB Law and Business Exam?
The CSLB Law and Business Exam is a mandatory test for anyone applying for a contractor license in California. It evaluates your knowledge of construction law, business practices, contract regulations, safety rules, employment laws, and financial responsibilities required to operate a legal and successful contracting business in the state.
Who is required to take the California Law and Business Exam?
Every applicant for a California contractor license must pass the Law and Business Exam, regardless of trade or classification. Whether you’re applying for a General B license, C-10 (electrical), or any other specialty, this exam is a universal requirement in addition to your specific trade exam.
What topics are covered on the CSLB Law and Business Exam?
The exam includes questions across seven topic areas:
- Business Organization and Licensing
- Business Finances
- Employment Requirements
- Insurance, Bonds and Liens
- Contract Requirements and Execution
- Public Works Projects
- Job Site Safety
Each section reflects real-world contractor responsibilities in California.
Is the CSLB Law and Business Exam multiple choice?
Yes, the entire exam consists of multiple-choice questions. Each question has four answer options, and only one is considered the most correct. Some answers may seem partially right, but your job is to choose the one that best matches California law and CSLB standards.
How difficult is the California Law and Business Exam?
The exam is considered challenging, especially if you’re not familiar with California-specific laws and business regulations. Many questions require attention to detail, application of legal principles, and a deep understanding of how contractor responsibilities work in practice. Proper preparation is key to passing.
How do I prepare for the Law and Business Exam in California?
The best way to prepare is by using study resources specifically designed for the CSLB exam. These may include prep courses, study guides, and full-length practice tests. Your goal should be to thoroughly understand all seven topic areas and regularly score 75% or higher on practice exams before taking the real test.
Are there free practice exams for the CSLB Law and Business test?
Yes – we offer a free, high-quality practice exam that mimics the real testing experience. It’s a great way to evaluate your readiness and get a feel for how questions are formatted and scored. You can take the free practice test here.
Can I bring code books or study materials into the testing center?
No. The CSLB Law and Business Exam is a closed-book exam. You are not allowed to bring any code books, notes, or study materials into the testing room. The only tools provided are a basic digital calculator and a digital notepad for scratch work.
How long do I have to pass the CSLB Law and Business Exam?
Once your application is accepted, you have 18 months to pass the exam. If you fail, you can retake the test as many times as needed during that window, as long as you wait the required 3 weeks between attempts.
How do I schedule my CSLB Law and Business Exam after submitting my application?
After your application is approved by the CSLB, you’ll receive a scheduling notice that allows you to book your exam through PSI, the state’s official testing partner. You’ll choose your preferred testing location and available date. It’s a good idea to schedule as soon as possible, as some centers book out weeks in advance.
Can I take the CSLB exam online or only in person?
The Law and Business Exam must be taken in person at an approved PSI testing center. There is currently no online or remote testing option.
How long is the CSLB Law and Business Exam?
You’ll have 3.5 hours (210 minutes) to complete the exam. Most applicants finish in 90 to 120 minutes, but it’s important to manage your time carefully and review flagged questions before submitting.
How is the CSLB Law and Business Exam scored?
Each version of the exam is scored based on a standardized system. You must correctly answer at least 65% of the questions to pass. If you fail, you’ll receive a report showing your score and performance by topic, which can help guide your study efforts before your next attempt.