Nevada Contractor License Exam — All Questions

The Nevada State Contractors Board sets a monetary limit on every license (the most the licensee may undertake in one or more contracts on a single construction site or subdivision site for a single client). When an applicant requests a monetary limit of $1,000,000 or more, what kind of financial statement must be filed?

• a.A statement compiled by an independent CPA within the last six months
• b.A statement on the Board's form with a verifying affidavit only
• c.A financial statement reviewed or audited by an independent CPA✓
• d.A federal income-tax return for the most recent year only

NAC 624.593 ties the kind of financial statement to the monetary limit requested. For $1,000,000 or more, the statement must be reviewed or audited by an independent CPA within one year before filing. Lower limits allow less: a CPA-compiled statement below $1,000,000, and the Board's form with an affidavit at $25,000 or less.NAC 624.593 (financial statement by monetary limit); NRS 624.220(2) (monetary limit)

A Nevada applicant's financial statement shows current assets of $180,000 and current liabilities of $110,000. What working capital will the Board consider?

• a.$110,000
• b.$160,000
• c.$70,000✓
• d.$290,000

Working capital = current assets - current liabilities = $180,000 - $110,000 = $70,000. Working capital measures short-term financial strength and is one factor the Board may weigh in judging a contractor's financial responsibility (NRS 624.263(2)).Construction Business and Law Manual for Nevada (working capital = current assets - current liabilities)

Before a Nevada license is issued, the applicant must file a contractor's license bond or a cash deposit in an amount the Board sets. Within what range does that amount fall?

• a.From $50,000 to $1,000,000
• b.From $1,000 to $500,000✓
• c.A flat $10,000 per license
• d.From $5,000 to $250,000

Under NRS 624.270 the license bond or cash deposit runs from $1,000 up to $500,000. The Board sets the amount according to the contractor's financial and professional responsibility and the size of its operations. The bond gives injured owners, workers, and suppliers a source of recovery if the contractor violates the licensing law.NRS 624.270 (contractor's license bond)

New Nevada contractors licensed for residential work pay into the Residential Recovery Fund in addition to application and biennial fees. What is that fund's purpose?

• a.To pay the contractor's own workers' compensation claims when the contractor's industrial insurance policy has lapsed or been cancelled
• b.To fund apprenticeship training statewide for the building trades through grants administered by the State Contractors Board
• c.To reimburse the State Contractors Board's staff salaries
• d.To compensate certain homeowners who suffer actual damages from an act or omission of a licensed residential contractor✓

The Residential Recovery Fund (NRS 624.470 et seq.) reimburses eligible owners of single-family residences for actual damages caused by a licensed residential contractor's misconduct when they cannot otherwise collect. It protects only owners who used a licensed contractor.NRS 624.470 et seq. (Residential Recovery Fund)

A general building contractor passed a contractor licensing examination in another state and applies for a Nevada 'B' license. Under NAC 624.600, when will the Nevada State Contractors Board waive the examination it would otherwise require?

• a.Whenever the applicant holds an active contractor's license in any other state, with no further review by the Board
• b.Only after the applicant has failed the Nevada examination three times within the six months after filing the application
• c.When it was an approved exam of an endorsing state, or a NASCLA-accredited exam the Board finds substantially equivalent✓
• d.Never; the regulation requires every applicant to sit both Nevada examinations regardless of any earlier exam results

NAC 624.600(2) says the Board will waive the examination for a person who passed a contractor licensing exam that was offered by an endorsing state and approved by the Board, or that is accredited by NASCLA and found by the Board to be substantially equivalent to the exam Nevada requires. An endorsing state is one whose licensing requirements the Board finds substantially equivalent to Nevada's. The Board may also waive the exam when a person's experience and qualifications justify it (NAC 624.600(3)). Every route rests on a Board determination, so a license from another state does not produce a waiver by itself.NAC 624.600(2)-(3) (waiver of examination)

Nevada groups contractor licenses into three broad classifications. Which pairing is correct?

• a.Class A - residential only; Class B - commercial only; Class C - engineering
• b.Class A - plumbing; Class B - electrical; Class C - general building
• c.Class A - Engineering; Class B - Building (general); Class C - specialty/trade✓
• d.Class A - Building; Class B - Engineering; Class C - does not exist

Nevada uses Class A (Engineering), Class B (General Building), and Class C (the specialty/trade classifications, of which there are dozens). Knowing which classification a scope of work falls under is essential to bidding legally.NRS 624.215 (classifications A, B, C)

Nevada's CMS (Contractor Management Survey) Business & Law examination has 60 scored questions plus 3 unscored questions and is open book. How many of the 60 scored questions must be answered correctly to pass?

• a.45✓
• b.54
• c.42
• d.30

A candidate must answer 45 of the 60 scored questions correctly, which is 75%. The 3 unscored questions do not count toward the score, and the exam allows 120 minutes plus 6 minutes for them. Because the exam is open book, effective use of the Construction Business and Law Manual for Nevada is a major part of preparation.PSI Candidate Information Bulletin for Nevada contractors, updated 3/25/2026 (CMS: 60 scored and 3 unscored questions, 45 correct to pass, open book)

To qualify for a Nevada contractor's license, how much relevant experience must the qualifying individual generally show?

• a.Ten full years of experience as a licensed journeyman within the immediately preceding 12 years, with no substitution of education or training allowed for any of them
• b.Four full years of relevant experience within the immediately preceding 15 years, with limited substitution of education for up to 3 of those years✓
• c.Six months of any construction work
• d.No experience at all if the CMS exam is passed

Nevada requires four full years of relevant experience within the prior 15 years. Education or related training may substitute for up to three years, but at least one year of hands-on experience is expected. The qualifying individual carries this experience for the license.NRS 624.260(6) (experience requirement)

A Nevada contractor's job has $80,000 of total cost, and she wants a 20% profit margin on the selling price. What must the bid (selling price) be?

• a.$100,000✓
• b.$96,000
• c.$16,000
• d.$88,000

For a target margin, divide cost by (1 - margin): $80,000 / (1 - 0.20) = $80,000 / 0.80 = $100,000. Simply adding 20% to cost ($96,000) yields only a 16.7% margin - the classic markup-vs-margin trap.Construction Business and Law Manual for Nevada (margin: price = cost / (1 - margin))

In preparing a competitive bid, what is the primary purpose of a quantity takeoff?

• a.To set the profit margin the owner will accept, based on what competing bidders are expected to charge
• b.To record the retainage the owner will withhold from each progress payment until final completion
• c.To measure and count the material and work quantities shown on the plans so they can be priced✓
• d.To determine the contractor's monetary limit with the Board before the license application is filed

A quantity takeoff is the systematic measuring and counting of the materials and work quantities from the drawings and specifications, so each item can be priced. It is the foundation of an accurate estimate; errors here flow straight into the bid.Construction Business and Law Manual for Nevada (quantity takeoff)

Under NRS 624.970, a residential contractor who agrees to improve a single-family residence for the owner who lives in it must give the owner what?

• a.A verbal estimate of the price, confirmed in writing only after the job is complete
• b.A one-page invoice listing the total price, with the scope of work to be agreed later
• c.A written contract stating the work, the total price, and the amount of each progress payment✓
• d.A copy of the contractor's most recent financial statement and written proof of its monetary limit

NRS 624.970 applies to residential improvement contracts entered into on or after October 1, 2023 between a residential contractor and the owner of a single-family residence who lives in it. The contract must be in writing and must describe the work, state the total price, and give the dollar amount of each progress payment, among other required contents. An oral estimate is not a substitute.NRS 624.970 (contracts for residential improvements)

During a project the owner requests additional work that was not in the original scope. What is the proper instrument to authorize the added work, price, and time?

• a.A notice of completion recorded by the owner after the work ends
• b.A performance bond issued by the contractor's surety
• c.A mechanic's lien recorded against the owner's property
• d.A written change order signed by the parties✓

Added or changed scope should be documented by a written change order that states the added work, its price, and any schedule impact, signed by both parties before the work proceeds. Verbal changes are a leading cause of payment disputes.Construction Business and Law Manual for Nevada (change orders)

Which statement about Nevada state taxes affecting a contracting business is correct?

• a.Nevada imposes a flat 5% personal income tax
• b.Nevada imposes a personal income tax on wages and business profits but exempts corporations from any state income tax whatsoever
• c.Nevada imposes a 9% corporate income tax on all profits, which replaces the sales and use tax on materials for licensed contractors statewide
• d.Nevada imposes neither a personal nor a corporate income tax, but does levy a Modified Business Tax (a payroll tax) on wages✓

Nevada has no personal or corporate income tax. It does impose a Modified Business Tax on wages (a payroll-based tax) and a Commerce Tax on large gross revenues, so a contractor still has state tax obligations to plan for.NRS Chapter 363B (Modified Business Tax); Nevada has no state income tax

Separate from what is withheld from the worker, how much FICA (Social Security plus Medicare) must a Nevada employer pay as its own matching share on $3,000 of wages that are below the Social Security wage base?

• a.$229.50✓
• b.$459.00
• c.$90.00
• d.$186.00

The employer matches the employee's FICA dollar for dollar: 6.2% Social Security + 1.45% Medicare = 7.65%. 7.65% x $3,000 = $229.50. The employee pays another $229.50, for 15.3% combined.IRS Circular E, Pub. 15 (FICA: 6.2% Social Security + 1.45% Medicare employer match)

On Nevada public-works projects above the statutory threshold, contractors must pay no less than the applicable prevailing wage. Which official determines Nevada's prevailing wage rates?

• a.The local homeowners' association
• b.The Nevada Labor Commissioner✓
• c.The general contractor's accountant
• d.The federal Department of Housing and Urban Development

Under NRS Chapter 338, the Nevada Labor Commissioner determines and publishes the prevailing wage rates that apply to qualifying public-works contracts. Contractors on those jobs must pay at least those rates and keep certified payroll records.NRS 338.030 (prevailing wage; Labor Commissioner)

A Nevada contractor pays a framer by the hour, sets his daily schedule, and supplies all the tools, but issues him a 1099. On audit, how is the worker most likely classified?

• a.As a volunteer, because no withholding was taken
• b.Classification cannot be reviewed once a 1099 has issued
• c.As an employee, because the contractor controls the manner and means of the work✓
• d.As an independent contractor, because a 1099 was issued

The right to control the manner and means of the work - schedule, tools, and methods - makes someone an employee regardless of the paperwork. Issuing a 1099 does not convert an employee into an independent contractor, and misclassification exposes the contractor to back payroll taxes and penalties.IRS Publication 15-A (common-law control test)

Workplace safety on Nevada construction sites is enforced primarily by which agency?

• a.Nevada OSHA, part of the Division of Industrial Relations, which operates an OSHA-approved state plan✓
• b.The Nevada State Contractors Board's examination division, which inspects jobsites whenever a license is renewed
• c.There is no workplace-safety enforcement in Nevada
• d.The U.S. Environmental Protection Agency

Nevada runs its own OSHA-approved state plan through Nevada OSHA within the Division of Industrial Relations (DIR). It enforces standards at least as effective as federal OSHA, so contractors answer to the state program on jobsite safety.NRS Chapter 618 (Nevada OSHA / Division of Industrial Relations)

A work-related fatality occurs on a Nevada jobsite. Within how many hours must the employer report it to the OSHA authority?

• a.30 days
• b.24 hours
• c.8 hours✓
• d.72 hours

Under NRS 618.378, a work-related fatality must be reported within 8 hours after the accident is reported to any agent or employee of the employer. An in-patient hospitalization, amputation, or loss of an eye carries a 24-hour reporting clock. Swapping the 8-hour fatality clock for 24 hours is a common trap.NRS 618.378 (reporting of accidents)

A surety bond required of a Nevada contractor differs from ordinary insurance in what key way?

• a.It covers the contractor's own employees for on-the-job injuries, in place of an industrial insurance policy
• b.It is legally identical to a general liability policy
• c.It is a three-party arrangement, and if the surety pays a claim the contractor must reimburse the surety✓
• d.It transfers the contractor's own risk to the surety with no repayment obligation, exactly as a liability policy does

A surety bond is a three-party guarantee among the principal (contractor), obligee (the party protected), and surety. If the surety pays a claim, the contractor must reimburse it. Insurance is a two-party contract that transfers the insured's own risk with no repayment.Construction Business and Law Manual for Nevada (surety bonds vs. insurance)

Which coverage must a Nevada contractor that has employees carry?

• a.A life insurance policy on each worker, naming the contractor as beneficiary
• b.Flood insurance on every jobsite, whether or not it lies in a flood zone
• c.Industrial insurance (workers' compensation) covering its employees✓
• d.No coverage of any kind, because Nevada leaves insurance to each employer's choice

Nevada requires employers, including contractors, to carry industrial insurance (workers' compensation) for their employees; coverage is compulsory once there is one or more employees (NRS 616B.633). For licensing, NRS 624.256 requires proof of industrial insurance or an affidavit that the contractor has no employees. When the Board is notified that a contractor is not in compliance, it gives the contractor 30 days to prove compliance and then summarily suspends the license.NRS 616B.633 (compulsory industrial insurance); NRS 624.256 (proof of coverage or affidavit for licensing)

A Nevada supplier with no direct contract with the owner begins delivering materials and gives the owner a Notice of Right to Lien 60 days later. Under NRS 108.245, what does that notice protect?

• a.Nothing at all, because a notice given more than 31 days after the first delivery is void
• b.Materials furnished in the 31 days before the notice and everything furnished after it✓
• c.Only the materials furnished after the date the owner actually receives the notice
• d.Everything furnished since the first delivery, however late the notice is given

Under NRS 108.245, a claimant who does not contract directly with the owner may give the Notice of Right to Lien at any time after first furnishing labor or materials. The notice is not void for being late. It preserves lien rights for what was furnished in the 31 days before the notice and for everything furnished after it (NRS 108.245(6)). Anything furnished earlier is left out, which is why the notice should go out as soon as work starts.NRS 108.245 (notice of right to lien; 31-day look-back in subsection 6)

In a construction schedule, the critical path is best described as the path that:

• a.Is the shortest route through the network
• b.Has the fewest activities regardless of their durations, which makes it the easiest chain for the superintendent to monitor
• c.Carries the most float of any path, giving the schedule its flexibility and absorbing delays without moving the finish date
• d.Is the longest chain of dependent activities, which sets the shortest possible completion time and has zero float✓

The critical path is the longest chain of dependent activities through the network. Because no other path is longer, it fixes the earliest the project can finish, and every activity on it has zero float, so any slip delays the whole project day for day.Construction Business and Law Manual for Nevada (CPM scheduling)