Business Management, Law, Accounting and Risk
Structure, numbers, and risk transfer
Understand entity types - sole proprietorship, partnership, LLC, S corporation, C corporation - and how each affects liability and taxation, plus licensing and qualifying-party rules. Know the financial statements: the balance sheet shows assets, liabilities, and equity at a point in time; the income statement shows revenue and expense over a period. Master work-in-progress schedules, over- and under-billings, percentage-of-completion revenue recognition, and retainage receivable.
Learn the risk-transfer tools: indemnity and additional insured status, waivers of subrogation, and the insurance family - commercial general liability, workers' compensation, builder's risk, umbrella, auto, and professional liability. Bonds come in three flavors: bid, performance, and payment. Mechanics' lien procedure is state-specific but generally requires preliminary notice, a deadline measured from last furnishing or recording, and strict compliance. Prompt payment statutes set payment and retainage rules. Dispute resolution runs negotiation, mediation, then arbitration or litigation.
Traps
Questions often confuse percentage of completion measured by cost with percentage billed, or ask you to place a transaction on the wrong statement. Lien deadlines are jurisdictional and unforgiving - apply exactly the days stated in the question and do not import another state's rule.
Worked example
Cost incurred 300,000 against a total estimated cost of 1,000,000 means 30 percent complete. With a 1,200,000 contract price, revenue earned is 360,000. If billings are 400,000, you are overbilled by 40,000 - a liability on the WIP schedule, not a profit.