Starting Your
HVAC Business

Choosing a Business Entity

How you legally structure your business affects your taxes, personal liability, and administrative burden. The most common options for new HVAC contractors:

Entity Type	Personal Liability	Taxes	Best For
Sole Proprietorship	Unlimited - your personal assets are at risk	Business income on personal return (Schedule C)	Testing the waters; solo operator with minimal risk
LLC (Single-Member)	Limited - personal assets protected	Same as sole prop by default (pass-through)	Most new HVAC contractors - simple protection
LLC (Multi-Member)	Limited for all members	Partnership return (pass-through)	Two or more owners/partners
S-Corporation	Limited	Pass-through; can save on self-employment tax above a salary threshold	Growing businesses with consistent profit (>$50K/yr)

? Start with an LLC

For most new HVAC contractors, an LLC is the right first step. It separates your personal assets from business liabilities (if someone sues your business, they can't take your house), costs $50-$500 to form depending on state, and has minimal ongoing requirements. File with your Secretary of State's office.

Contractor Licensing

HVAC contractor licensing requirements vary dramatically by state. Some states require a state contractor license; others only require local/city licenses; some require both. Before taking your first paying job, verify:

What licenses are required in your state for HVAC work
Whether you need a master HVAC license (most states require this to pull permits)
Whether your EPA 608 certification satisfies any refrigerant handling requirements
Local city/county business license requirements
Whether you need to be licensed to work on gas lines (usually plumbing license or separate gas license)

Resources: your state's contractor licensing board website, the ACCA (Air Conditioning Contractors of America), or the PHCC (Plumbing-Heating-Cooling Contractors Association).

Insurance - The Non-Negotiables

Insurance Type	What It Covers	Typical Cost	Required?
General Liability	Property damage and bodily injury to third parties. If you damage a customer's home or someone is injured on the job site, GL pays.	$1,000-$3,000/yr	Yes - most customers and projects require it
Workers' Compensation	Medical and lost wages for employees injured on the job	Varies by payroll; typically 10-20% of labor costs	Required in most states when you have employees
Commercial Auto	Vehicle accidents in your work vehicle. Personal auto insurance excludes commercial use.	$1,500-$3,000/yr per vehicle	Yes - personal policy won't cover work accidents
Tools & Equipment	Theft or damage to your tools and equipment	$300-$800/yr	Recommended
Contractor's Bond	Financial guarantee that you will complete the work as contracted. Required by many municipalities.	$100-$500/yr	Often required for licensing

? Never Drive to a Job Without Commercial Auto

Your personal auto insurance policy almost certainly excludes accidents that occur while using your vehicle for business purposes. One accident while driving to a job - uninsured - can financially destroy your new business. Get commercial auto on day one.

Registering Your Business

Choose and register your business name - check your state's business name database for availability. If operating as anything other than your legal name, file a DBA (Doing Business As)
Form your entity - file LLC articles of organization or corporate articles with your Secretary of State
Obtain an EIN (Employer Identification Number) - free from the IRS at irs.gov. Required to open business bank accounts and hire employees
Open a business bank account - separate from personal accounts. This is critical for LLC liability protection and makes taxes much easier
Obtain required licenses - contractor license, city business license, and any trade-specific licenses
Set up accounting software - QuickBooks, Wave, or FreshBooks from day one

? Overview Module 2: Pricing & Estimating ?