Licensing requirements for buying an HVAC business in Texas

HVAC (Heating, Ventilation, and Air Conditioning) businesses are an essential component of the construction and maintenance industry. According to recent data, the HVAC contractor industry earned over $130B of revenue in 2022 and outpaced the broader construction industry in growth.

These tailwinds, along with industry consolidation, have made HVAC businesses a popular target for acquisition entrepreneurs looking to buy an existing small business. Unfortunately, one of the first roadblocks that these entrepreneurs run into are the licensing requirements for owning an HVAC business.

Licensing Requirements for Owning an HVAC Business in Texas

Texas licensing requirements are handled by the Texas Department of Licensing and Regulation. There are two types of license tiers: contractor licenses and technician licenses. 

Technicians assist licensed air conditioning and refrigeration contractors in performing maintenance and repair work. Technicians are not allowed to advertise services and must work under the supervision of licensed contractors.

An AC and Refrigeration Contractor license is required to own, operate and advertise an HVAC repair and maintenance business. Furthermore, no insurance provider will insure an unlicensed contracting business.

To get an HVAC Contractor license, individuals must meet one of two requirements:

1. Have at least 48 months of practical experience in air-conditioning and refrigeration-related work under the supervision of a licensed air conditioning and refrigeration contractor in the past 72 months; or

2. Have held a technician certification for the past 12 months and you have at least 36 months of practical experience in air-conditioning and refrigeration-related work under the supervision of a licensed air conditioning and refrigeration contractor in the past 48 months.

There are exceptions for the following individuals:

• Those with a degree, diploma, or certification in air-conditioning and refrigeration

• Those who are a licensed engineer or have a degree in mechanical engineering

• Those who have military training in air-conditioning and refrigeration

Additionally, there are two license classes for contractors:

• License A allows contractors to work on any size unit.

• License B allows contractors to work on cooling systems of 25 tons and under, and heating systems of 1.5 million BTUs/hour and under.

How to Buy an HVAC Business in Texas without a License

1. Responsible Managing Employee

Many HVAC businesses will have a number of technicians with the appropriate certifications. Techs who have spent at least 3 years with the company working on the licensed owner will be eligible to become a contractor.

2. Responsible Managing Owner

In some cases, it may make sense to keep the owner on as a partial equity holder for the sake of continuing to operate under his or her HVAC contractor license. Typically the threshold for being considered an owner for licensing purposes is 20% ownership stake.

This can present issues for buyers planning on acquiring an HVAC business with an SBA loan, which historically has required a full change in ownership to finance a business purchase.

3. Get the License Yourself

If you are not coming from the HVAC industry, your only realistic course of action is to qualify for one of the experience exemptions listed by the TDLR and proceed to acquiring your contractor’s license without spending 36 months or more in the industry.

This is the most favorable path as it removes risk of an employee or owner dispute leading to you owning an unlicensed HVAC contracting business.

How Long Does It Take to Get an HVAC Contractor’s License in Texas?

Assuming you meet the exemptions or experience requirements, it takes around 4 to 6 weeks to get the contractor’s license. During this time, you must do the following:

1. Submit a completed application

2. Schedule and take your exam

3. Pay the required fees

4. Submit proof of insurance (varies by license class)

What Happens if I Don’t Get an HVAC Contractor’s License in Texas?

If you, nor any other owner or employee, hold an HVAC contractor license, you can be subject to fines from the TDLR administration. Furthermore, most SBA lenders will deny financing your business acquisition.

The exact fine schedule can be found here and penalties may range from $500 to $1,000 for  Class A violations to $5,000 for Class D violations.

Information posted on this page is not intended to be, and should not be construed as tax, legal, investment or accounting advice. You should consult your own tax, legal, investment and accounting advisors before engaging in any transaction.