Anyone have experience purchasing businesses that need contractor licenses?

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October 13, 2020

by a searcher from University of Southern California in Redwood City, CA, USA

At my firm we have actually looked at several opportunities in areas such as plumbing, landscaping, paving and HVAC. While we understand that the contractor license requirements may vary from state to state, we are focusing on California at least for the moment. When dealing with a business in which the owner is the holder of the license, is there an uncomplicated way in which the license can be obtained or transitioned onto the new management?

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Reply by a searcher
from University of Pennsylvania in Park City, UT, USA
Everyone in the business performing HVAC (or other services probably) must hold a license. If you're buying a company and the owner leaves, I believe that won't be an issue as long as you still have credible, licensed technicians on board. If you don't, the business is probably too small and you need to recruit new technicians.

Here are some excerpts for Texas:

Sec###-###-#### LICENSE REQUIRED.
(a) A person may not engage in air conditioning and refrigeration contracting unless the person holds an air conditioning and refrigeration contractor license under this subchapter or Subchapter G.
(b) An air conditioning and refrigeration contractor license issued under this subchapter is valid throughout the state. A person who holds a license issued under this subchapter is not required to hold a municipal license under Subchapter G to engage in air conditioning and refrigeration contracting in any municipality in this state.
(c) A person holding an air conditioning and refrigeration contractor license may assign that license to only one permanent office of one air conditioning and refrigeration contracting company.

Sec###-###-#### REQUIREMENT FOR AIR CONDITIONING AND REFRIGERATION CONTRACTING COMPANY.
(a) An air conditioning and refrigeration contracting company must employ full-time in each permanent office a license holder who holds an appropriate license assigned to that company.


Source: https://www.tdlr.texas.gov/acr/acrlaw.htm
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Reply by an intermediary
from California State University, Northridge in Vancouver, WA, USA
As an example, I have a mandate to sell an electrical contractor in Oregon. A "signing supervisor" is required. The owner fills that position currently and has a retired fellow as a backup. There are also supervisors available on a contract basis. An SBA loan will allow the owner to continue on in an advisory role for 12 months post close. This gives the new owner a bridge to develop at least one journeyman into the supervisory role as well as line up backup supervisors. On one hand it is a regulatory risk and hurdle, but on the other hand it is a competitive barrier. Hope this reply helps, Leland.
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