HVAC & Mechanical in California
California will not let your contractor's license change hands.
The Contractors State License Board will reissue a license number to a different entity in exactly six situations, and a sale to an unrelated buyer is not among them. Business and Professions Code section 7075.1 makes a California contractor's license non-transferable to any other person or entity under any circumstances, which puts the C-20 at the center of a structuring decision most HVAC sellers expect to be a tax decision. What follows from that rule is a calendar. The license survives the qualifying individual's departure by 90 days, and section 7031 lets a customer recover everything it paid for work performed while the license was down. Wraith runs its California engagements alongside an affiliated firm.
Los Angeles-Long Beach-Anaheim / San Francisco-Oakland-Berkeley (Bay Area) / San Diego-Chula Vista-Carlsbad / Riverside-San Bernardino-Ontario (Inland Empire)
Ninety days after the qualifier leaves, the C-20 suspends itself
The C-20 Warm-Air Heating, Ventilating and Air-Conditioning classification does not carry boiler and steam fitting, refrigeration or sheet metal, which sit in the separate C-4, C-38 and C-43 classifications, so a target running commercial refrigeration behind a C-20 alone has a scope gap the buyer inherits. That a mechanical license is held through a named individual and does not travel with the assets is true of HVAC licensing generally. What California adds is a closed list. Section 7075.1(a) provides that no license, regardless of type or classification, is transferable to any other person or entity under any circumstances, and subsection (c) then names the six situations in which the Board will reissue a license number to a different entity: a parent and subsidiary merger or a change of filing status between domestic and foreign, once for corporations and again for limited liability companies; an immediate family member continuing the business of a deceased or absent individual licensee, and a corporation or LLC that family forms to continue the same business; a corporation or LLC formed by an individual licensee who keeps more than 50 percent of the voting power; and an LLC formed by a corporation to continue its business with identical personnel. None of the six reaches a third-party buyer, so a buyer's only routes to a license are the licensed entity itself or a fresh application.
In an asset purchase nothing licensable moves, so the buyer's entity needs its own C-20, its own qualifying individual, its own bonds and its own workers' compensation coverage or certification of self-insurance before it can lawfully contract, and a C-20 licensee must carry that coverage whether or not it has employees. In a stock or membership interest purchase the licensed corporation or LLC is still the licensee, so the number, the classification and the disciplinary record behind them continue because nothing was transferred to anyone. Section 7076(h) cancels a corporate license on the corporation's dissolution, merger or surrender of its right to do business, subsection (i) does the same for an LLC, the entity has 90 days to notify the Registrar, and where nobody does the license is canceled 60 days after the Board discovers the change while researching the corporate records. Schedule a holdco merger or an entity conversion for the week after closing and that section cancels the license the stock purchase was built to preserve.
Where the owner is the responsible managing officer, section 7068.2 gives the licensee 90 days from the qualifier's disassociation to notify the Registrar in writing and 90 days to replace them, and at the end of the 90 days the license is automatically suspended or the classification removed. One 90-day extension is available where a replacement application is already on file, and where the ground is a disputed disassociation date or the qualifier's death the total cannot run past 180 days from that event. Until the Board receives the written notice, the departing qualifier remains responsible for the licensee's construction operations, so a seller who stays on the license to accommodate a buyer carries that responsibility into the buyer's tenure and should be indemnified for it by name.
Section 7065.1 waives the examinations only on narrow histories: an employee of a corporation or LLC replacing that entity's former qualifying individual who has been continuously employed in a supervisory capacity in the same classification for five of the seven preceding years, where the entity itself held an active license in that classification over the same period and has not used the waiver in the past five years, and an immediate family member on comparable facts. A qualifier hired from outside almost never waives, so the realistic candidates are the seller and a long-tenured supervisor already inside the company. Where the responsible managing officer holds 10 percent or more of the voting stock, the separate $25,000 Bond of Qualifying Individual is waived on an exemption certification, and a stock purchase that takes that holding out from under them puts the bond back.
Section 7068.1 lets one individual qualify for a second firm only where at least 20 percent of the equity of each is commonly owned, where one is a subsidiary of or joint venture with the other on that same 20 percent test, or, for a partnership, corporation or LLC, where a majority of the partners, officers or managers are the same. Whatever the structure, no qualifier may act for more than three firms in any one-year period. The same section defines what the qualifier owes: supervision and control of the employer's construction operations, technical and administrative decisions, checking jobs for proper workmanship and supervision on the site. Running a nominal qualifier against that standard is a misdemeanor carrying up to six months in county jail and a fine of not less than $3,000 and not more than $5,000.
Section 7031 is what makes the calendar expensive. A contractor that was not duly licensed at all times during performance cannot bring or maintain an action to collect compensation for the work, and subsection (b) lets the person who hired it recover all compensation already paid, without regard to whether the work was good or whether the customer knew. The claim runs for a year from completion or cessation of the work, so every invoice raised while the license sits suspended is money a customer can demand back.
Wage claims now reach the license, and the qualifier cannot be restrained
Assembly Bill 1002, effective January 1, 2026, authorizes the Attorney General and the Board to bring a civil action to suspend, revoke or deny a contractor's license for failing to pay workers or to comply with a wage judgment or court order. The Attorney General must notify the Board before initiating the action, and the Board may intervene or collaborate in the proceedings. A wage judgment against the target is now a license question, and in an equity purchase the buyer takes the judgment and the license inside the same entity.
The one employee whose departure suspends the license is also an employee California will not let a buyer restrain. Section 16600 voids every contract by which anyone is restrained from engaging in a lawful profession, trade or business, and the exceptions that survive it run to owners: section 16601 reaches an owner who disposes of all of their ownership interest, and section 16602.5 reaches an LLC member covenanting in anticipation of the termination of that interest. A qualifying individual who holds equity and sells it in the deal can be bound. One who holds none cannot, and that is the same person whose disassociation starts the 90-day clock and whose replacement will usually have to sit the examinations.
The registration your in-home salesperson carries, and the deposit they may take
Below the contractor's license California registers one group of people: anyone who solicits, negotiates or executes a home improvement contract on the company's behalf. Section 7152 requires that person to register with the Board as a home improvement salesperson, unless they are an officer of the corporation, a general partner, the qualifying person, or the sale was initiated by the buyer at the contractor's fixed place of business, which is not what a comfort advisor at a kitchen table is doing. Section 7153 makes selling without the registration a misdemeanor, and subsection (b) makes any security interest taken on a contract solicited by an unregistered salesperson unenforceable, which reaches financed changeouts specifically. The registration belongs to the individual and is held in association with the employing licensee, and the licensee, not the salesperson, carries the duty to tell the Board when that employment begins and when it ends. In an asset purchase every one of those associations is re-papered to the buyer's entity before anyone can sell.
Section 7159 requires a written home improvement contract once the aggregate contract price exceeds $500, which is every residential changeout. Section 7159.5 caps the down payment at $1,000 or 10 percent of the contract amount, whichever is less, which constrains how a residential HVAC company collects cash ahead of installation. A target collecting half the price up front is over that cap on every residential contract it writes.
Where the work triggers field verification under Title 24, the mechanical permit cannot be closed until HERS documentation is registered through an approved provider by a certified rater. Sample permit pulls and HERS registrations against the service history on residential changeouts. A changeout that triggered field verification and carries no HERS registration is an open permit, and the buyer inherits both the open permit and an installation nobody verified.
Questions California sellers ask
- Can the buyer keep our license number?
- Only if the licensed entity itself continues. Section 7075.1(c)'s six reissuance situations are internal restructurings and family successions on the death or absence of an individual licensee, so a stock or membership interest purchase keeps the C-20 with the corporation or LLC, and an asset purchase starts a fresh application with its own qualifying individual, its own bonds and its own workers' compensation coverage before the buyer can lawfully contract.
- I am the responsible managing officer and I want out at closing. How long does the company have?
- Ninety days. Section 7068.2 requires written notice to the Registrar within 90 days of your disassociation and gives the licensee 90 days from that date to replace you, after which the license is automatically suspended or the classification removed. One 90-day extension exists where a replacement application is already on file, and where the ground is a disputed disassociation date or death the total cannot exceed 180 days. Your replacement will usually have to sit the trade and law examinations, because section 7065.1 waives them only for someone with five of the seven preceding years in a supervisory capacity in the same classification at an entity licensed in it over the same period. Expect the buyer to ask you to stay on the license, and expect to negotiate an indemnity for it, because until the Board receives the notice you remain responsible for the company's construction operations.
- Can the buyer restrain my qualifying individual after closing?
- Only as an owner. Section 16600 voids every contract by which anyone is restrained from engaging in a lawful profession, trade or business, and the exceptions run to owners: section 16601 reaches an owner who disposes of all of their ownership interest, and section 16602.5 reaches an LLC member covenanting in anticipation of the termination of that interest. A qualifying individual who holds equity and sells it in the deal can be bound. One who holds none cannot, and that is the same person whose disassociation under section 7068.2 starts the 90-day clock on the license.
- We plan to buy several California HVAC companies. Can one qualifier cover them?
- Not by default. Section 7068.1 permits an individual to qualify for an additional firm only where at least 20 percent of the equity of each firm is commonly owned, where one is a subsidiary of or joint venture with the other on the same test, or where a majority of the partners, officers or managers are the same, and no qualifier may act for more than three firms in any one-year period regardless. If the platform holds each acquisition in its own licensed entity, the equity thresholds have to be engineered into the holding structure before the second closing, not after it.
- Do our in-home salespeople need a credential of their own?
- Yes, if they solicit, negotiate or execute home improvement contracts away from your fixed place of business. Section 7152 requires them to register with the Board as home improvement salespersons unless they are an officer, a general partner or the qualifying person. Section 7153 makes selling without the registration a misdemeanor and makes a security interest taken on a contract solicited by an unregistered salesperson unenforceable. The registration is the individual's and is held in association with the employing licensee, so a buyer taking the business by asset purchase re-papers every one of them.
Where these facts come from
Everything above that is a rule rather than a judgment is listed here with its publisher and the date it was checked. Licensing, tax and non-compete rules change, sometimes without much notice. None of this is legal or tax advice, and it is not a substitute for your own counsel and CPA.
Section 7075.1(a) provides that no license, regardless of type or classification, shall be transferable to any other person or entity under any circumstances. Subsection (c) permits reissuance of a license number to a different entity in six situations: to a corporation on a parent or subsidiary merger or a change of filing status with the Secretary of State between domestic and foreign, where the new entity continues the business of the formerly licensed corporation; the parallel provision for limited liability companies; to an immediate family member continuing the business of a deceased or absent individual licensee; to a corporation or limited liability company formed by immediate family members to continue that business; to a corporation or limited liability company formed by an individual licensee who retains more than 50 percent of the voting power; and to a limited liability company formed by a corporation to continue its business with identical personnel.
California Legislative Information, Business and Professions Code section 7075.1. Checked 2026-09-07.
A sale to an unrelated third-party buyer does not appear among the reissuance situations. Nothing in this section addresses how any particular transaction should be structured, and no claim is made here about how California HVAC transactions are structured in practice.
The Board states that a new license is required whenever the business entity changes, that licenses are not transferable from one business to another even where the qualifying individual is the same for both, and that if a company or individual buys an existing licensed contracting company, the license number cannot be transferred to the new company unless one of the above requirements is met.
California Contractors State License Board, Change in Business Entity. Checked 2026-09-07.
The qualifying phrase at the end of the Board's sentence refers back to the reissuance situations set out in Business and Professions Code section 7075.1(c) and is quoted here in full for that reason.
The C-20 Warm-Air Heating, Ventilating and Air-Conditioning classification covers fabricating, installing, maintaining, servicing and repairing warm-air heating systems and water heating heat pumps, ventilating systems with blowers and plenum chambers, air-conditioning systems, and the ducts, registers, flues, humidity and thermostatic controls and air filters connected to them, including solar-assisted systems. Adjacent mechanical scopes sit in the C-4 Boiler, Hot Water Heating and Steam Fitting, C-38 Refrigeration and C-43 Sheet Metal classifications, and in the B General Building classification.
California Contractors State License Board, licensing classifications. Checked 2026-09-07.
The classification text is reproduced from the Board's classification page. Whether a specific commercial scope requires an additional classification is a question for the Board or California counsel on the facts of the work performed.
Section 7076(h) provides that a corporation license shall be canceled upon the corporation's dissolution, merger, or surrender of its right to do business in this state, and requires the corporation to notify the Registrar in writing within 90 days. Where the corporation fails to notify the board, the license is canceled 60 days after the board's discovery when researching the relevant corporate records. Subsection (i) applies the same rule to limited liability companies by reference to the Secretary of State's records. Subsection (j) allows a licensee disputing the cancellation date to petition the Registrar on a showing of good cause, within 90 days of the board's official notice of cancellation.
California Legislative Information, Business and Professions Code section 7076. Checked 2026-09-07.
Last amended by SB 1455 (Stats. 2024, Ch. 485). Cancellation under this section and reissuance under section 7075.1(c) are separate questions: an intragroup parent and subsidiary merger or a redomestication may have a reissuance route that a third-party sale does not.
Section 7068.2(a) requires written notice to the Registrar within 90 days where a responsible managing officer, responsible managing employee, responsible managing member or responsible managing manager disassociates from the licensed entity, and gives the licensee 90 days after the date of disassociation in which to replace the qualifier; on failure to replace within 90 days the license is automatically suspended or the classification removed at the end of the 90 days. Subsection (d) makes the departing qualifier responsible for the licensee's construction operations until the later of the disassociation date or the date the board receives written notice. Subsection (e) allows one 90-day extension where a replacement application is already on file, and under the disputed-disassociation-date and death-of-qualifier grounds the licensee has no more than a total of 180 days after the disassociation or death in which to replace the qualifier.
California Legislative Information, Business and Professions Code section 7068.2. Checked 2026-09-07.
The 180-day outer limit is stated in the statute for the disputed-date and death grounds. The third extension ground is a delay in processing the replacement application that is outside the applicant's control, and the statute does not apply the 180-day total to it in terms.
Section 7065.1 permits the registrar to waive the examination where the qualifying individual has been listed as personnel of record of an active licensee in the same classification for five of the seven preceding years; where an immediate family member seeks the license to continue the business of an individual licensee who is deceased or absent, on comparable experience; and where the qualifying individual is an employee of a corporation or limited liability company seeking to replace its former qualifying individual, has been continuously employed by that entity in a supervisory capacity in the same classification for five of the seven preceding years, the entity has held an active license in that classification over the same period, and the entity has not been granted the waiver within the preceding five years.
California Legislative Information, Business and Professions Code section 7065.1. Checked 2026-09-07.
Waiver eligibility is determined by the registrar on the applicant's documented history. A qualifier recruited from outside the licensed entity will ordinarily sit the trade and law examinations on the Board's scheduling timeline, which is why replacement lead time belongs on the closing calendar.
Section 7068.1 makes the qualifying individual responsible for exercising supervision and control of their employer's or principal's construction operations, defined to include supervising construction operations, making technical and administrative decisions, checking jobs for proper workmanship, and supervision on construction sites. The individual may not act as qualifier for an additional individual or firm unless there is common ownership of at least 20 percent of the equity of each firm, the additional firm is a subsidiary of or a joint venture with the first on the same 20 percent test, or, for a firm under paragraphs (2), (3) or (4) of section 7068(b), a majority of the partners, officers or managers are the same. Subsection (b) provides that a qualifying individual may act as the qualifier for no more than three firms in any one-year period. Violation is grounds for discipline and is a misdemeanor punishable by up to six months in county jail, a fine of not less than $3,000 and not more than $5,000, or both.
California Legislative Information, Business and Professions Code section 7068.1. Checked 2026-09-07.
The common partners, officers or managers prong is available for partnerships, corporations and limited liability companies and not where the additional licensee is an individual.
Section 7031(a) bars a person from bringing or maintaining any action, or recovering in law or equity, for compensation for the performance of any act or contract requiring a license unless the person was a duly licensed contractor at all times during the performance. Subsection (b) permits a person who utilized the services of an unlicensed contractor to bring an action to recover all compensation paid to the unlicensed contractor for performance of any act or contract, subject to a one-year limitations period running from completion or cessation of the work.
California Legislative Information, Business and Professions Code section 7031. Checked 2026-09-07.
Subsection (e) provides a narrow substantial compliance route where the court finds the contractor had been duly licensed, acted reasonably and in good faith to maintain the license, did not know or reasonably should not have known it was unlicensed, and acted promptly and in good faith to reinstate. Whether it is available is a fact question for the court and should not be assumed in an underwriting model.
Section 7071.9 requires a separate $25,000 bond of qualifying individual where the qualifier is not the proprietor, a general partner or a joint licensee, in addition to and not combined with the contractor's bond required by section 7071.6. A responsible managing officer who owns 10 percent or more of the voting stock of the corporation, or a limited liability company qualifier owning at least a 10 percent membership interest, is exempt on filing a Bond of Qualifying Individual Exemption Certification.
California Legislative Information, Business and Professions Code section 7071.9. Checked 2026-09-07.
The Board requires the business name and license number on a bond to correspond exactly with its records, so a name change on a surviving entity requires a rider and a newly licensed entity requires new bonds before it can contract.
The Board states that all active C-8 Concrete, C-20 Warm-Air Heating, Ventilating and Air-Conditioning, C-22 Asbestos Abatement, C-39 Roofing and C-61/D-49 Tree Service contractors are required to carry workers' compensation insurance or a valid Certification of Self-Insurance, whether or not they have employees. The exemption is also unavailable to a licensee whose license lists a responsible managing employee.
California Contractors State License Board, workers' compensation requirements. Checked 2026-09-07.
This classification-specific mandate is transitional. Under SB 216 (Stats. 2022, Ch. 978) as deferred by SB 1455 (Stats. 2024, Ch. 485), the requirement extends to every licensed classification operative January 1, 2028. Third-party commentary stating a January 1, 2026 universal effective date has not accounted for that deferral.
Section 16600(a) makes void every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind. Subsection (b)(1), added by AB 1076 (Stats. 2023, Ch. 828), provides that the section shall be read broadly, in accordance with Edwards v. Arthur Andersen LLP, to void the application of any noncompete agreement in an employment context, or any noncompete clause in an employment contract, no matter how narrowly tailored, that does not satisfy an exception in this chapter. Subsection (c) provides that the section applies to a contract even where the contract is not between an employer and employee.
California Legislative Information, Business and Professions Code section 16600. Checked 2026-09-07.
The closing clause, that does not satisfy an exception in this chapter, is quoted here in full because the exceptions it preserves are the authority for every covenant that survives in a sale.
Section 16601 permits a covenant not to compete against a person who sells the goodwill of a business, an owner of a business entity selling or otherwise disposing of all of their ownership interest in that entity, and an owner of a business entity that sells all or substantially all of its operating assets together with the goodwill of the entity, all or substantially all of the operating assets of a division or subsidiary together with the goodwill of that division or subsidiary, or all of the ownership interest of any subsidiary. Owner includes any owner of capital stock of a corporation and any member of a limited liability company. The restraint is limited to a specified geographic area in which the business was carried on and is enforceable only so long as the buyer or a successor in the goodwill carries on a like business there.
California Legislative Information, Business and Professions Code section 16601. Checked 2026-09-07.
The section reaches an owner disposing of all of their ownership interest, so a seller retaining rollover equity may fall outside it. Geographic overbreadth and the buyer ceasing to carry on a like business in the area are the two places these covenants most often fail.
Section 16602.5 permits a member of a limited liability company to agree not to carry on a similar business within a specified geographic area where the business of the limited liability company has been transacted, in anticipation of the dissolution of the limited liability company or the termination of that member's interest in it, so long as any other member or successor in interest carries on a like business there.
California Legislative Information, Business and Professions Code section 16602.5. Checked 2026-09-07.
Section 16602 makes the equivalent provision for partners in anticipation of dissolution of the partnership or dissociation of the partner. None of the three exceptions reaches an employee who is not also an owner.
Assembly Bill 1002 (2025 to 2026 regular session), effective January 1, 2026, authorizes the Attorney General and the Contractors State License Board to bring civil actions to suspend, revoke or deny a contractor's license for failing to pay workers or to comply with a wage judgment or court order, with the Attorney General required to notify the Board before initiating such an action and the Board permitted to intervene or collaborate in the proceedings.
California Legislative Information, AB 1002 (2025-2026). Checked 2026-09-07.
Described from the Board's summary of the enacted bill. Confirm the codified text and the procedural conditions with California counsel before relying on the mechanism in a diligence plan or an indemnity.
Section 7152(b) provides that a home improvement salesperson shall register with the board in order to engage in the business of, or act in the capacity of, a home improvement salesperson. Subsection (d) exempts officers of record of a corporation, general partners of record of a partnership, the qualifying person, and a person who is a bona fide employee and whose sale is initiated by the buyer at the contractor's fixed place of business.
California Legislative Information, Business and Professions Code section 7152. Checked 2026-09-07.
The registration is issued to the individual and is held in association with the employing licensee, and the licensee rather than the salesperson carries the duty to report the beginning and end of that employment. The association mechanics and forms sit with the Board and should be confirmed against its current registration forms before a closing checklist is built around them.
Section 7153(a) makes it a misdemeanor for a person to engage in the business of, or act in the capacity of, a home improvement salesperson without holding a valid registration or being exempt. Subsection (b) provides that any security interest taken by a contractor to secure payment under a home improvement contract solicited by a person acting as a home improvement salesperson who is neither registered nor exempt is unenforceable.
California Legislative Information, Business and Professions Code section 7153. Checked 2026-09-07.
Section 7159 governs home improvement contracts and applies where the aggregate contract price, including finance charges, exceeds $500, requiring the contract to be in writing and to contain the terms the section specifies.
California Legislative Information, Business and Professions Code section 7159. Checked 2026-09-07.
The section's required terms and disclosures are extensive and are amended from time to time. A contract template should be reviewed against the current text rather than against an older compliant version.
Section 7159.5(a)(3) provides that a downpayment on a home improvement contract may not exceed $1,000 or 10 percent of the contract amount, whichever amount is less, excluding finance charges.
California Legislative Information, Business and Professions Code section 7159.5. Checked 2026-09-07.
The California Energy Commission states that, depending on the work being done, Home Energy Rating System testing may be mandatory under the Building Energy Efficiency Standards in Title 24, Part 6, that properly permitted work will trigger any necessary HERS testing, that testing must be performed by a certified field verification and diagnostic testing rater through an approved HERS provider, and that HERS documentation is still required to close the permit.
California Energy Commission, Home Energy Rating System program. Checked 2026-09-07.
Which measures trigger field verification depends on the scope of the permitted work and on the standards edition in force when the permit was issued. Local building departments administer permit closure.
Page last reviewed 2026-09-07.
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