CC Business and Financial Management 2

Question 1

What is the primary advantage of organizing a contracting business as an LLC?

Accepted Answer

It provides personal liability protection for the owners

Answer

It eliminates the need for a contractor license

Answer

It removes tax obligations

Answer

It allows the business to operate without insurance

Question 2

What is 'workers' compensation' and why is it important for contractors?

Accepted Answer

Insurance that covers employees injured on the job, required in most states for contractors with employees

Answer

A bonus paid to workers for fast completion

Answer

A type of contractor license

Answer

A federal tax program

Question 3

What does a contractor's 'markup' cover when pricing a job?

Accepted Answer

Overhead costs and profit margin added on top of direct project costs

Answer

The cost of permits only

Answer

Material costs without labor

Answer

Taxes owed to the IRS

Question 4

Which tax form must a contractor issue to unincorporated subcontractors paid $600 or more in a tax year?

Accepted Answer

Form 1099-NEC

Answer

Form W-2

Answer

Form 941

Answer

Form 1040

Question 5

What is 'accounts receivable' in a contracting business?

Accepted Answer

Money owed to the contractor for completed work that has not yet been paid

Answer

Money the contractor owes to suppliers

Answer

Funds in the business bank account

Answer

Prepaid insurance premiums

Question 6

What is the purpose of a 'lien release bond' also known as a 'discharge bond'?

Accepted Answer

To release a mechanics lien from a property by substituting a bond as security for the disputed amount

Answer

To obtain a new contractor license

Answer

To replace a performance bond

Answer

To cancel a building permit