Tennessee Business Organization & Financial Statements
Tennessee sizes a contractor's monetary limit from its financial statement, so the numbers on the balance sheet matter. This chapter covers the required statement, net worth, and working capital.
The required financial statement
The Board sizes the monetary limit from the contractor's financial statement. When the requested limit exceeds $1,500,000, a reviewed or audited financial statement prepared by a CPA is required; lower limits may be supported by a compiled statement. The larger the limit, the higher the assurance the Board demands.
Net worth
Net worth (owner's equity) equals total assets minus total liabilities. A balance sheet showing $900,000 in assets and $520,000 in liabilities gives a net worth of $380,000. Because the monetary limit is based partly on net worth, an accurate balance sheet directly affects how large a project the contractor may take.
Working capital
Working capital equals current assets minus current liabilities, and it measures the short-term liquidity a contractor can put toward a job. Tennessee sets the monetary limit at the lesser of ten times net worth or ten times working capital, so both figures must be strong to support a large limit.
State-specific details
State exam facts
- State regulator
- Tennessee Board for Licensing Contractors (TBLC), Department of Commerce and Insurance
- Passing score
- 73%
- Scored questions
- 50
- Time limit
- 140 minutes
Does Tennessee require a state contractor license?
Yes. The Tennessee Board for Licensing Contractors (TBLC) licenses contractors under T.C.A. Title 62, Chapter 6. A license is required before bidding at $25,000 or more for general building work, $3,000 for masonry, and any dollar amount for electrical/plumbing/mechanical.
What is on the Tennessee Business and Law exam?
The Business and Law exam is 50 questions, 140 minutes, and requires 73% to pass. The monetary limit is the lesser of ten times net worth or ten times working capital; a reviewed or audited CPA financial statement is required for a limit above $1,500,000.
What are Tennessee's bid-law and lien rules?
Bidders must disclose license information under §62-6-119. Tennessee lien law (T.C.A. §66-11) gives the prime contractor a one-year enforcement period, and there is a 5% retainage-escrow rule (§66-34-104). Tennessee has no state income tax on wages.
Sources: https://www.tn.gov/commerce/regboards/contractor.html