5 Tips for Starting an HVAC Business in California

5 Tips for Starting an HVAC Business in California

Congratulations! You just completed your heating, ventilation, air conditioning and cooling (HVAC) training program. All of that class time and field training is about to pay off for you.

HVAC careers continue to be steady employment in California’s job market. Jobs for HVAC professionals are expected to grow 15 percent from 2016 to 2026. This rate is much faster than the average for all other occupations. With all of this good news, you may be asking yourself if starting an HVAC business is the right move for you.

You’re in luck: here’s a guide on how to start an HVAC business and set your career dreams in motion. The industry is looking for hard working professionals like you to keep our homes and businesses comfortable.

Starting an HVAC Business

If your goal is to work for yourself, here are some first steps to launching your company.

1. Finalize Necessary Certifications

Before you can launch your HVAC business, all HVAC technicians have to have a federal Section 608 Technician certification. The US Environmental Protection Agency (EPA) manages this certification program. There are four certification categories under EPA Section 608 that you have to pass:

  • EPA Type I Certification – servicing small appliances
  • EPA Type II Certification – servicing high-pressure systems
  • EPA Type III Certification – servicing low-pressure systems
  • Universal EPA Certificate- covers all three other types of certifications.

You’ll need at least one of these to start an HVAC business.

2. Select Your HVAC Business Structure

Your next important step to starting your own HVAC business is to decide which business model you want to adopt. HVAC professionals can choose between launching either a franchise or sole-proprietorship or corporate business model.A franchise is when you take the name and reputation of an existing company and incorporate it into your own small business. A franchise is a business commitment between a franchisee and a franchisor. The franchisee pays for the franchisor’s brand name to promote services in new territories.

The biggest benefit to a franchise is that you won’t need to jumpstart a brand name. You’ll get to introduce a company that the public is already familiar with. You also won’t need to develop a business strategy because a plan is already created.

Sole proprietorships allow individuals to own and operate their own business. This model is desirable because it allows business owners to have complete control of the company. Sole proprietors are also responsible for taxes and any liabilities that the company incurs. You can also develop a corporation in which to run your business.  Many people decide to incorporate to separate the assets and expenses of the corporation from personal ones. You will be required to file corporate tax returns in addition to your personal ones each year, but many business owners do it this way in order to protect their personal assets and separate their business from personal income.

3. Apply for Your Contractor’s License

All HVAC professionals doing work in California must be licensed by the California Contractors State License Board (CSLB). Licenses can be issued to both individuals and corporations.

You will need to successfully pass California’s State Contractor’s License test before you finalize this licensing process. After you’ve passed the test, you can complete your “Application for Original Contractor License.” Licensees are also required to show at least four years of verified work experience.

The “Application for Original Contractor License” carries a non-refundable $330 fee per application. Applicants must also have a $15,000 contractor bond deposited to cover their damages that result from negligence. Contractor licenses are renewed every two years at a fee of $400 per renewal.

4. Establish Your Financial Systems

If you don’t have access to an accountant or private attorney, you will need to set up your own finances for banking and taxes. Open a new bank account for your HVAC business start up with your new business name. Some HVAC business owners find it helpful to print their contractor’s license number on any checks written by the business.

New businesses also need to pick a tax year. A “tax year” is an annual accounting period for reporting revenues and costs. Tax years can follow either the calendar year (January 1-December 31st) or any other consecutive 52-week span.

5. Get Liability, Health, and Worker’s Comp Insurance

There are three main insurance packages you should have in place before starting your own HVAC business. Proof of insurance protects you from lawsuits as well as helps attract desirable employees. These three insurance programs include liability, health, and worker’s comp insurance.

Liability insurance protects your company against any damage or injury claims to people’s private property. You should also investigate employer-sponsored health insurance to provide for your employees’ medical needs. Worker’s comp insurance provides for lost employee wages if the employee is injured on the job.

Employer-sponsored health insurance helps reduce your premium expenses because employees pay for a percentage of the costs. Worker’s comp insurance protects you from employee injury-related lawsuits. You can offer to replace a portion of their lost wages in exchange for their promise not to sue you for their injuries. 

Next Steps

Feel like you know what you need for starting an HVAC business? You can begin by checking out the North American Technician Excellence (NATE) website. They can help you find EPA Section 608 test sites as well as prepare for the exams.

Talk to other franchise businesses to learn more about their success records. If you know you’ll want to have a sole proprietorship, check the Fictitious Business Name Statement requirements for the county where your business is located.

You can also find for more helpful advice on our blog to see what you need to be a success in the HVAC industry. Starting an HVAC business is a complex procedure that doesn’t happen overnight. So start today to ensure a smooth process.

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