Michigan Builders
Business/Law/Accounting Mock Exam
Question and Answers [100% Correct]
2024/2025 Latest Release
What is the main purpose of Michigan's Lien Act?
**ANS** To protect contractors and suppliers from non-payment by securing their right to payment
through a lien on the proper...
**ANS** To protect contractors and suppliers from non-payment by securing their right to payment
through a lien on the property.
Under Michigan law, how long does a subcontractor have to file a lien after the last day labor was
performed?
90 days.
Which of the following is required to register a construction business in Michigan?
**ANS** A builder’s license.
What type of bond is often required by local municipalities for large construction projects?
Payment and performance bond.
In Michigan, what agency regulates contractor licenses for builders?
**ANS** The Department of Licensing and Regulatory Affairs (LARA).
When does Michigan law require written contracts for residential construction?
**ANS** For contracts exceeding $600.
What is the minimum passing score for the Michigan Residential Builder exam?
70%.
1
,Which of the following is NOT a legal method to terminate an employee in Michigan?
Termination based on race or gender.
What is the maximum allowable interest rate for a late payment under Michigan's Prompt Payment Act?
1.5% per month.
In Michigan, how long must a builder retain records related to a construction project?
**ANS** Three years.
When must a Notice of Commencement be filed on a Michigan construction project?
Before the start of the project.
What legal entity offers the most personal liability protection in Michigan?
**ANS** A Limited Liability Company (LLC).
In the event of a construction dispute in Michigan, what is typically the first step?
Attempting mediation or arbitration before going to court.
Which tax form must an independent contractor provide to their clients?
**ANS** A W-9 form.
When are Michigan employers required to provide workers’ compensation insurance?
**ANS** When they have three or more employees.
What is the primary purpose of a performance bond?
To ensure the completion of a project as per contract terms.
Which financial statement shows a company’s profitability over time?
**ANS** The income statement.
2
, What type of insurance must Michigan builders carry to protect against property damage claims?
General liability insurance.
If a contractor fails to complete a project, what legal remedy might the property owner seek?
**ANS** A claim against the contractor’s performance bond.
Which of the following is a characteristic of a sole proprietorship?
**ANS** The owner has unlimited personal liability.
In Michigan, when is a construction contract considered valid?
When both parties agree to terms and there is an exchange of value.
How is "reasonable care" defined in construction law?
**ANS** The degree of care that a reasonably prudent contractor would exercise under similar
circumstances.
What is the significance of a "time is of the essence" clause in a construction contract?
It requires that project deadlines be strictly adhered to.
What type of tax is generally applied to labor costs in Michigan construction contracts?
**ANS** Labor is typically exempt from sales tax.
Which of the following is required to maintain a builder’s license in Michigan?
**ANS** Continuing education every renewal period.
How does Michigan law define "substantial completion" of a construction project?
When the project is sufficiently complete for its intended use or occupancy.
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