A construction business is organized as a corporation. If the corporation is sued and cannot pay a judgment, what is generally at risk?

The assets owned by the corporation itself, not the shareholders' personal assets

The personal homes and bank accounts of every shareholder

The personal assets of the highest-paid officer only

Nothing, because corporations cannot be sued

Under the Statute of Frauds, which of the following is generally required to be in writing to be enforceable?

A contract for the sale of land or an interest in real property

A one-hour verbal agreement to sweep a job site

A casual promise to lend a friend a hammer

An agreement to buy lunch for the crew

According to the hierarchy of controls, which method of protecting workers from a hazard is MOST effective and should be considered first?

Eliminating the hazard entirely

Providing personal protective equipment (PPE)

Writing the hazard into a safety manual

A standard C corporation is often described as facing 'double taxation.' What does that mean?

The corporation pays income tax on its profits, and shareholders again pay tax on dividends they receive

The corporation must pay its state and federal taxes twice each year

Every shareholder must file two separate personal tax returns

The business is taxed once when formed and once when dissolved

A 'notice to proceed' issued by the owner tells the contractor:

The official date to begin work, which often starts the contract time clock

That the final inspection has passed

That the building may now be occupied

That all payments have been released

Under the federal Fair Labor Standards Act, what is generally true about the overtime standard?

Overtime is owed for hours over 40 in a workweek, at 1.5 times the regular rate, for covered nonexempt employees

Overtime is owed after 8 hours in any single day nationwide

Overtime must always be paid at double the regular rate

Overtime applies only to salaried managers

Which project would require a Maryland Home Improvement Contractor license rather than a separate registration?

Remodeling the kitchen and re-roofing an existing owner-occupied home

Building a brand-new single-family house on a vacant lot

Constructing a new residential subdivision

Manufacturing modular home components in a factory

In Maryland, performing home-improvement work that requires an MHIC license without holding one is:

A violation of the Home Improvement Law that may be charged as a misdemeanor, with civil penalties

Permitted as long as the homeowner consents in writing

Maryland Home Improvement (MHIC) Exam Practice Test

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Sample practice questions

A few real questions from this free bank, with full explanations. Use the practice tool above for the whole set.

1. Business Organization & Licensing
A construction business is organized as a corporation. If the corporation is sued and cannot pay a judgment, what is generally at risk?
- a.The personal homes and bank accounts of every shareholder
- b.The personal assets of the highest-paid officer only
- c.The assets owned by the corporation itself, not the shareholders' personal assets
- d.Nothing, because corporations cannot be sued
Answer: c
Explanation: A corporation is a separate legal entity from its owners (shareholders). This separation creates limited liability: creditors and judgments generally reach only the assets the corporation owns, and shareholders risk losing only what they invested — not their personal homes or savings. That protection can be lost only in unusual cases such as fraud or 'piercing the corporate veil.'
2. Contracts & Contract Law
Under the Statute of Frauds, which of the following is generally required to be in writing to be enforceable?
- a.A one-hour verbal agreement to sweep a job site
- b.A casual promise to lend a friend a hammer
- c.An agreement to buy lunch for the crew
- d.A contract for the sale of land or an interest in real property
Answer: d
Explanation: The Statute of Frauds requires certain categories of contracts to be in writing and signed to be enforceable — most notably contracts for the sale of land or interests in real property, and agreements that cannot be performed within one year. This is why construction and real-property agreements are documented in writing. Minor, short, everyday arrangements are not covered.
3. Safety & OSHA
According to the hierarchy of controls, which method of protecting workers from a hazard is MOST effective and should be considered first?
- a.Eliminating the hazard entirely
- b.Providing personal protective equipment (PPE)
- c.Posting a warning sign
- d.Writing the hazard into a safety manual
Answer: a
Explanation: The hierarchy of controls ranks protections from most to least effective: elimination, substitution, engineering controls, administrative controls, and finally PPE. Removing the hazard entirely is best because it does not depend on worker behavior or equipment holding up. PPE is the last line of defense — it only reduces exposure and relies on correct, consistent use, so it is the least reliable control on its own.
4. Business Organization & Licensing
A standard C corporation is often described as facing 'double taxation.' What does that mean?
- a.The corporation must pay its state and federal taxes twice each year
- b.The corporation pays income tax on its profits, and shareholders again pay tax on dividends they receive
- c.Every shareholder must file two separate personal tax returns
- d.The business is taxed once when formed and once when dissolved
Answer: b
Explanation: Double taxation refers to profits being taxed at two levels: first the C corporation pays corporate income tax on its earnings, then shareholders pay personal income tax on any dividends distributed to them. Owners often avoid this by electing S corporation status or forming an LLC, both of which allow profits to 'pass through' and be taxed only once on the owners' personal returns.
5. Estimating & Bidding
One roofing 'square' equals how many square feet of roof area?
- a.10 square feet
- b.50 square feet
- c.100 square feet
- d.1,000 square feet
Answer: c
Explanation: In roofing, one 'square' is a standard unit equal to 100 square feet of roof surface. If a roof measures 2,400 square feet, it is 24 squares. Roofing materials and labor are commonly priced per square, so converting the measured area into squares (area divided by 100) is a routine and frequently tested estimating step.
6. Project Management & Scheduling
A 'notice to proceed' issued by the owner tells the contractor:
- a.The official date to begin work, which often starts the contract time clock
- b.That the final inspection has passed
- c.That the building may now be occupied
- d.That all payments have been released
Answer: a
Explanation: A notice to proceed (NTP) is the owner's formal authorization directing the contractor to start the work, and it frequently establishes the date from which the contract time (and any completion deadline or liquidated-damages period) is measured. It marks the transition from award to active construction. It is distinct from a certificate of occupancy, which comes at the end and authorizes use of the finished building.
7. Safety & OSHA
OSHA construction standards are found in which part of Title 29 of the Code of Federal Regulations?
- a.29 CFR Part 1910
- b.29 CFR Part 1904
- c.29 CFR Part 1926
- d.29 CFR Part 40
Answer: c
Explanation: OSHA's safety and health standards for the construction industry are contained in 29 CFR Part 1926. (General industry standards are in Part 1910, and injury recordkeeping requirements are in Part 1904.) Knowing that construction work is governed by Part 1926 helps you locate specific rules — for example, fall protection at 1926.501 and excavations at 1926.651-652.
8. Employment & Labor Law
Under the federal Fair Labor Standards Act, what is generally true about the overtime standard?
- a.Overtime is owed after 8 hours in any single day nationwide
- b.Overtime must always be paid at double the regular rate
- c.Overtime applies only to salaried managers
- d.Overtime is owed for hours over 40 in a workweek, at 1.5 times the regular rate, for covered nonexempt employees
Answer: d
Explanation: The FLSA's federal overtime rule requires covered nonexempt employees to be paid at least one-and-one-half times their regular rate for hours worked beyond 40 in a workweek. The federal standard is measured weekly, not daily, and the premium is time-and-a-half (not double time). Some states impose additional daily-overtime rules, but the nationwide FLSA baseline is the 40-hour workweek at 1.5x.
9. MHIC Licensing & Who Needs a License
Which project would require a Maryland Home Improvement Contractor license rather than a separate registration?
- a.Building a brand-new single-family house on a vacant lot
- b.Constructing a new residential subdivision
- c.Remodeling the kitchen and re-roofing an existing owner-occupied home
- d.Manufacturing modular home components in a factory
Answer: c
Explanation: 'Home improvement' is the repair, replacement, remodeling, or alteration of an EXISTING residence — remodeling a kitchen and re-roofing a home fits squarely. New-home construction is not home improvement; new-home builders register with the Attorney General's Home Builder Registration Unit, not the MHIC.
Source: Md. Bus. Reg. §8-101
10. Maryland Home Improvement Law, Contracts & Guaranty Fund
In Maryland, performing home-improvement work that requires an MHIC license without holding one is:
- a.A violation of the Home Improvement Law that may be charged as a misdemeanor, with civil penalties
- b.Permitted as long as the homeowner consents in writing
- c.A federal felony
- d.Allowed for jobs under $25,000
Answer: a
Explanation: Contracting for home improvement without the required MHIC license violates the Home Improvement Law and can be prosecuted as a misdemeanor, with additional civil penalties. It also cuts off the contractor's practical remedies and bars the homeowner from the Guaranty Fund.
Source: Md. Bus. Reg. Title 8 (unlicensed activity)