Business & Law Study Notes
Part of the SP-PH exam comes from the NASCLA Contractors Guide to Business, Law & Project Management — a different book from the NEC. Field techs often underestimate it. These notes cover the high-yield topics; tab the NASCLA guide alongside your code book.
Open book here too: the business/law questions are also open book. Tab the NASCLA guide's sections so you can find contracts, liens, taxes, and safety fast.
1. Business structures
- Sole proprietorship — simplest; owner has unlimited personal liability; income taxed personally.
- Partnership — two+ owners; general partners share unlimited liability.
- LLC — limited liability plus pass-through taxation; popular for small contractors.
- Corporation (C-corp) — strongest liability shield, but double taxation (corporate profits + shareholder dividends). An S-corp election restores pass-through.
2. Licensing & insurance
- NC licensing — electrical contracting for others requires a license from the NC Board of Examiners of Electrical Contractors; SP-PH is a special restricted classification.
- General liability — covers third-party bodily injury and property damage.
- Workers' compensation — covers employees injured on the job (NC: generally required at 3+ employees — verify current rule).
- Surety bonds — a three-party guarantee: bid bond (you'll sign if you win), performance bond (you'll finish), payment bond (subs/suppliers get paid).
3. Contracts
- Five elements: offer, acceptance, consideration, legal capacity, and a lawful purpose.
- Statute of Frauds — certain contracts must be in writing to be enforceable (e.g., real property, those not performable within a year).
- Change order — written, signed modification of scope/price/schedule; do it before the extra work.
- Warranties — express (stated) vs implied (merchantability/fitness).
- Breach & remedies — damages, and liquidated damages (a pre-agreed amount for late completion).
4. Liens & getting paid
- Mechanic's lien — secures payment with a claim against the improved property (NC: file a claim of lien generally within 120 days of last furnishing — verify deadlines).
- Lien waiver — releases lien rights in exchange for payment (partial or final).
- Retainage — a percentage withheld from each payment until satisfactory completion.
- Payment terms — e.g., "Net 30"; manage cash flow so payroll/materials are covered.
5. Taxes & payroll
- Withholding — employers withhold federal income tax and FICA (Social Security + Medicare), and pay a matching FICA share plus FUTA (unemployment).
- Worker classification — employee (W-2) vs independent contractor (1099); determined mainly by the degree of control over the work.
- Forms — W-4 (employee withholding), I-9 (work eligibility), W-2 (employee wages), 1099 (contractor payments).
6. Labor & safety
- OSHA General Duty Clause — provide a workplace free of recognized serious hazards, even where no specific standard exists.
- Recordkeeping & training — hazard communication, fall protection, and required postings.
- EEO — no discrimination in hiring/employment.
7. Estimating & project management
- Markup vs margin — markup is profit as a % of cost; margin is profit as a % of selling price. They are not the same number.
- Overhead — indirect costs (office, insurance, vehicles) that must be recovered across jobs.
- Scheduling — the critical path is the longest sequence of dependent tasks; it sets the minimum project duration.
- Bidding — accurate takeoffs, contingencies, and clear scope prevent loss.
These notes summarize common NASCLA topics for study orientation only — the exam is based on the official NASCLA guide and NC law. Verify specifics there and with official sources.