Alabama General Contractor Business and Law Exam Guide: Code of Alabama Title 34, Chapter 8

Alabama Business and Law Exam at a Glance

The current PSI Alabama General Contractors candidate bulletin (updated January 23, 2026) describes the exam as follows:

• Who takes it: all general contractors.
• Questions and time: 50 questions in 120 minutes. PSI may add one to ten unscored experimental items, which still count against your time. The on-screen tutorial does not count, for up to 15 minutes.
• Passing score: 70%. Your result appears on screen as soon as you finish, and PSI emails you a score report. If you fail, you get a diagnostic report showing your strong and weak areas.
• Open book: yes. The only allowed reference is the NASCLA Contractors Guide to Business, Law and Project Management, Alabama General, 3rd Edition.
• Fee: $96 per exam.
• Calculator: silent, battery-operated and non-programmable, with no paper tape and no alphabet keyboard.

The board's testing page says every application received since January 22, 2008 needs a trade exam as well as Business and Law. That is why most candidates book two exams.

When Alabama Requires a General Contractor License (Code of Ala. § 34-8-1)

Under Code of Alabama § 34-8-1, you are a "general contractor" if you build or superintend a project for a fixed price, commission, fee or wage when "the cost of the undertaking is one hundred thousand dollars ($100,000) or more." Covered projects include buildings, highways, sewers, structures, site work, grading, paving and other improvements. Covered work includes construction, alteration, maintenance, repair, rehabilitation, remediation, reclamation and demolition.

Two other numbers matter. Swimming pool work needs a license once the fee exceeds $5,000. A subcontractor needs a license when it does covered work of $100,000 or more for a general contractor or another subcontractor. Subcontractors get half fees, no bid limit and no exam, and they need to be licensed before starting work, not before bidding (§ 34-8-7(c)).

Alabama Contractor License Eligibility and Requirements

The application rules are in § 34-8-2:

• Status: you must be a U.S. citizen, or legally present in the U.S. with appropriate federal documentation.
• Timing: file your application at least 30 days before a regular board meeting. The board meets in January, April, July and October (§ 34-8-24).
• Insurance: provide proof of liability insurance.
• Financials: provide your last annual financial statement, prepared by a CPA or an independent licensed public accountant approved by the board.
• Scope: you can only be classified for the types of work you ask for.

The board must also "investigate thoroughly the financial responsibility and past record of all applicants," including their skill in "reading plans and specifications, estimating costs, construction ethics" (§ 34-8-3). A business can be examined through one or more of its responsible managing officers or employees.

Alabama Bid Limits: The A to U Classifications

Alabama ties what you can bid to your finances. The limit is "not more than 10 times either the net worth or working capital, whichever is the lesser amount." The board then picks the closest letter classification. Each limit applies to "any one single contract undertaking":

• A: up to $100,000.
• B: up to $250,000.
• C: up to $500,000.
• D: up to $1,000,000.
• E: up to $3,000,000.
• U: unlimited, for anyone who qualifies above E.

For example, with net worth of $80,000 and working capital of $45,000, the formula uses the lower figure: 10 × $45,000 = $450,000. If your statement falls short, the board may consider the market value of your assets, or a bond that covers the gap.

Alabama Contractor Exam Cost and Fees

• PSI exam fee: $96 per exam, or $106 for the Building Construction (Commercial), Highways and Streets, Municipal and Utility, and Heavy Railroad trade exams. You pay this every time you register, retakes included.
• Application: $300 under the statute. It is not refundable.
• Annual renewal: $200, plus a $50 late penalty if you renew more than 90 days after expiration.
• Bid limit increase, classification change or reciprocity verification: no more than $75.
• Inactive status: $200.
• Subcontractors: half of the general contractor fees.

How to Register and Schedule the Alabama Exam With PSI

1. Apply to the board. Once it approves you, your eligibility lasts one year from the date the state received your application.
2. Register at PSI's Alabama contractor site or call (855) 257-1619. You can book as late as one day before the exam, up to 6:00 pm Central Time.
3. Pick a test center. The bulletin lists Birmingham (Vestavia Hills), Huntsville, Mobile and Montgomery, and you can also test at PSI centers in other states.
4. To cancel or reschedule without losing your fee, cancel at least two days ahead, online or by speaking to an agent. A voicemail does not count.
5. Arrive at least 30 minutes early with valid ID and your own reference book. Arriving late counts as a missed appointment, and you lose the fee.

Alabama Business and Law Exam Content Outline

• Licensing: 8 questions
• Estimating and Bidding: 5 questions
• Liens: 2 questions
• Financial: 5 questions
• Payroll and Taxes: 6 questions
• Personnel and Labor: 5 questions
• Project Management: 3 questions
• Contracts: 6 questions
• Business Organization: 2 questions
• Risk Management: 4 questions
• Safety Recordkeeping and Environmental: 4 questions

The 8 Licensing questions come from Alabama's own law, which our practice test covers. The other 42 come from the NASCLA guide. If you take the NASCLA-accredited commercial general building trade exam, the bulletin lists 115 questions in 330 minutes, with 81 correct needed to pass.

Key Alabama Contractor Law Rules (Code of Ala. 34-8)

• Penalties: unlicensed contracting, using another firm's license or an expired one, and giving false evidence to the board are all Class A misdemeanors. Owners, architects and engineers who consider a bid from an unlicensed contractor commit a Class B misdemeanor (§ 34-8-6).
• License numbers: must appear on every contract, subcontract, bid and proposal (Class B misdemeanor). Owners must reject bids without one (Class C misdemeanor, § 34-8-8).
• Fines: administrative fines run from $500 to $5,000. The board can issue cease and desist orders and get injunctions without posting bond, with fines of up to $5,000 plus fees (§§ 34-8-4, 34-8-6).
• Revocation process: charges must be sworn and in writing. They are heard within 90 days in Montgomery, with at least 10 days' notice. Appeals go to the Circuit Court of Montgomery County (§§ 34-8-4, 34-8-27).
• Exemptions: include government work supervised by a licensed architect or engineer, residences and private dwellings, building on your own property, supervised utility work, routine landscape maintenance and temporary labor brokers (§ 34-8-7). None of these apply to pool contractors.
• Commercial energy code: it must be based on the latest IECC or ASHRAE 90.1 (§ 34-8-55).

How Alabama Differs From Other States

• The threshold is high, at $100,000. Georgia's residential threshold is $2,500.
• Bid limits come from a financial formula with letter classes. There are no tiers based on your exam results.
• Licenses renew every 12 months. Georgia renews every two years.
• The permit threshold of $50,000 is lower than the licensing threshold.
• Homes are outside this chapter altogether.

Alabama Business and Law Study Plan (Two Weeks)

1. Days 1 and 2: get the NASCLA Alabama General guide and add permanent tabs to each chapter and the Alabama section.
2. Days 3 and 4: study Licensing (8 questions). Work through the Alabama Contractor Law Practice Test until you score 85% or more.
3. Days 5 and 6: study Estimating, Financial and Business Organization, and work every ratio and markup example.
4. Days 7 and 8: study Payroll and Taxes, and Personnel and Labor (11 questions together).
5. Days 9 and 10: study Contracts, Liens and Project Management.
6. Days 11 and 12: study Risk Management and Safety Recordkeeping.
7. Days 13 and 14: take a timed 120-minute mock exam. Look up every question you missed and note its tab.

Common Mistakes on the Alabama Business and Law Exam

• Bringing the wrong book: you need the Alabama General edition, and PSI does not supply it.
• Using sticky tabs: Post-it notes must be removed before the exam starts.
• Mixing up the dollar thresholds: $100,000 for a license, more than $5,000 for pools and $50,000 for permits.
• Using the larger figure in the bid limit formula: it is the lesser of net worth and working capital.
• Letting your eligibility expire: the year runs from the date the state received your application, not from your first exam.

What Happens After You Pass

The board reviews your records and both exam results before granting the certificate (§ 34-8-3). Your license lists the types of work you may do and your bid limit letter. It is valid for 12 months. If the board receives your renewal and $200 fee at least 30 days before expiration, your license stays in force until the board acts on it. To go inactive, notify the board in writing at least 30 days before expiration.

What Our Alabama Practice Test Covers

The practice test has 175 original scenario questions on Code of Alabama §§ 34-8-1 to 34-8-55, covering thresholds, licensing and bid limits, discipline, exemptions and subcontractors, the board, and the commercial energy code. Every answer cites its section and quotes the statute. It does not cover the board's administrative rules (Chapter 230-X-1) or the NASCLA business topics, and it is not a copy of the PSI exam.

Frequently Asked Questions

How many questions are on the Alabama Business and Law exam?

The PSI candidate bulletin (updated 1/23/26) lists 50 questions in 120 minutes. PSI may add one to ten unscored experimental questions, and they count against your time.

What is the passing score?

70%, according to the PSI bulletin.

Is the Alabama Business and Law exam open book?

Yes. The one allowed reference is the NASCLA Contractors Guide to Business, Law and Project Management, Alabama General, 3rd Edition. PSI does not supply it, so bring your own copy. You may highlight, underline and add permanent tabs, but you may not write in it.

How much does the exam cost?

PSI charges $96 per exam, and $106 for some commercial, highway, utility and railroad trade exams. On top of that, Code of Ala. § 34-8-2 sets a $300 application fee, which is not refundable.

Do I need to pass a trade exam as well?

Yes. The board says every application received since January 22, 2008 must include a trade exam as well as Business and Law. Subcontractors are the exception: under § 34-8-7(c)(7) they do not sit any exam.

Can I retake it if I fail?

Yes. PSI allows unlimited attempts during your one-year eligibility period, and you pay the fee each time. The statute also says a failed applicant "may be reexamined at any regular or called meeting of the board."

When do I need an Alabama general contractor license?

When the cost of the undertaking is $100,000 or more, or more than $5,000 for swimming pool work (§ 34-8-1). Building permits need proof of a license or an exemption from $50,000 (§ 34-8-9).

Do I need this license to build houses?

No. Section 34-8-7 exempts "the construction of any residence or private dwelling" from this chapter. Check with the separate residential licensing authority.

How long is the license good for?

12 months. You renew every year for a $200 fee, and the late penalty is $50 if you renew more than 90 days after expiration (§ 34-8-2).

Is it hard?

PSI and the board publish no pass rate. Two minutes and twenty-four seconds per question is plenty if you have tabbed your book well. Candidates who have not practised looking things up under time pressure struggle most.

Sources: Code of Alabama Title 34, Chapter 8 (2025). PSI Alabama bulletin, updated January 23, 2026. Facts were checked October 30, 2026 (PKT). Always confirm current details with PSI and the board.