Business Management, Contracts, and Michigan Licensing Law
What this domain tests
Residential contracting in Michigan is regulated under Article 24 of the Michigan Occupational Code (Public Act 299 of 1980), administered by LARA's Bureau of Professional Licensing. The exam checks the license threshold, education and renewal rules, required contract terms, lien deadlines, and the business math of running a job profitably.
Licensing rules
- A residential builder license or a maintenance and alteration contractor license is required for residential work of $600 or more in labor and materials.
- Applicants complete 60 hours of approved prelicensure coursework; salespersons work under a licensed builder.
- Licenses run on a three-year cycle with 21 hours of continuing competency per renewal.
- Unlicensed contracting is a misdemeanor, and an unlicensed contractor is generally barred from suing to collect for the work.
Contracts and liens
Put scope, price, payment schedule, change-order procedure, and warranty in writing before work begins. Michigan residential contracts must carry the Homeowner Construction Lien Recovery Fund notice; the fund can pay homeowners for defective work by licensed builders. Under the Construction Lien Act (MCL 570.1101 et seq.), a claimant records a claim of lien within 90 days after last furnishing labor or material and must sue to enforce within one year. Get signed lien waivers from subs before final payment.
Worked example
Direct costs on a kitchen remodel are $80,000 and the owner wants a 20% gross margin. Price = $80,000 ÷ (1 − 0.20) = $100,000. Pricing it as cost plus 20% ($96,000) yields only a 16.7% margin - a $4,000 error that quietly eats the profit.
Traps that cost marks
Confusing markup with margin; starting without a signed contract; missing the 90-day lien recording deadline; assuming an out-of-state license transfers; treating the deposit as untouchable project cash rather than money held against future costs.