How to Start an HVAC Business in Texas: TDLR Air Conditioning and Refrigeration License

If you want to run an HVAC business in Texas, the license that matters most is the Air Conditioning and Refrigeration (ACR) contractor license from the Texas Department of Licensing and Regulation (TDLR). Texas has no state general business license and no statewide general contractor or roofing license, so the TDLR ACR license is the core state credential your business will be built around.

This guide covers what the license requires, the order that works best, and the business setup steps you need to finish before you bill your first customer. TDLR reported 60,552 ACR licensees in fiscal year 2025, so the field is crowded. A complete application, the right insurance, and a properly formed business are what help you win commercial work and avoid delays.

This article is informational content, not legal or tax advice. Confirm current requirements with the agencies named below before you file.

What the TDLR ACR License Covers

The ACR contractor license lets you contract for air conditioning and refrigeration work in Texas. Your first decision is the class, because it sets the size of equipment you can work on and the insurance you must carry.

Class	Equipment scope	Commercial general liability (per occurrence / aggregate / products)
Class A	Any size unit	$300,000 / $600,000 / $300,000
Class B	Cooling systems of 25 tons or less and heating of 1.5 million BTU/hour or less	$100,000 / $200,000 / $100,000

Endorsements extend or focus your scope. Texas recognizes endorsements for environmental air conditioning, commercial refrigeration, and process cooling or heating. If you plan to service walk-in coolers in grocery stores or process cooling for a plant, confirm with TDLR which endorsement applies before you apply.

Pick your class based on the largest equipment you expect to service in your first two years. A residential-focused shop may be well served by Class B. A shop that wants to bid on large rooftop units on commercial buildings will likely need Class A. Ask TDLR how a later change in class works, since the experience and insurance requirements differ.

Materials and Documents to Gather First

Collect these before you open the application. Missing paperwork is one of the most common reasons a file stalls.

• Proof of age. You must be at least 18.
• Experience records. Employment dates, duties, hours worked, and the name and license number of each supervising ACR contractor. Keep W-2s, pay stubs, or signed employer letters.
• Certification and degree records. Technician certification documents, HVAC degree transcripts, or military training records if you plan to use an exception.
• Insurance certificate. A commercial general liability certificate that matches the class you are applying for.
• Entity documents. If you form an LLC, your Certificate of Formation (Form 205) and filing receipt, plus your federal Employer Identification Number (EIN).
• Payment. The $115 application fee.

Step-by-Step: Licensing and Business Setup

Step 1: Decide your structure before you buy insurance

Your legal name has to match across your license, insurance policy, bank account, and invoices, so settle your entity type first. Many small HVAC owners choose a limited liability company (LLC) because it keeps business liability separate from personal assets. That is a general observation, not advice. Confirm with TDLR whether the license is issued to you personally, to the entity, or both, before you buy insurance so the policy names the right party.

Step 2: Form your business entity

To form an LLC, you file a Certificate of Formation (Form 205) with the Texas Secretary of State. The filing fee is $300. A corporation files Form 201 for the same $300. Keep these points in mind:

• Name. The name must include an organizational designation such as LLC or Limited Liability Company and must be distinguishable from existing filings. Call (512) 463-5555 to check preliminary availability.
• Name reservation. If you need time, file Form 501 for $40. It holds the name for 120 days.
• Registered agent. Every Texas LLC must continuously maintain a registered agent and a registered office. The office must be a physical street address in Texas where the agent can be served during business hours. A P.O. box or mail forwarding service alone does not qualify, and you cannot serve as your own registered agent. Changing the agent or office costs $15.
• Speed. The Secretary of State does not publish a guaranteed standard turnaround. Electronic filing through SOSDirect is the fastest regular route. Paid Texas Express tiers are $50 for Standard Expedite (typically two to three business days), $500 for Next Day Expedite (filings received by 12:00 p.m.), and $750 for Same Day Expedite (filings received by 12:00 p.m.). Expedite fees are in addition to the filing fee.

If you will operate under a name other than your legal name, such as Lone Star Cooling, you need an assumed name certificate. An LLC files Form 503 with the Secretary of State for $25. A sole proprietor files with the county clerk in each county where it does business, and county fees vary. Since September 1, 2019, LLCs no longer also file with the county clerk. The certificate can state a term of up to 10 years and must be refiled before it expires.

Step 3: Prove your experience

TDLR accepts two main experience paths:

• 48 months of experience under a licensed ACR contractor, within the past 72 months.
• A technician certification held for 12 months, plus 36 months of experience.

Texas also provides exceptions for applicants with HVAC degrees, engineers, and people with military training. The credit each exception earns depends on the specific rule, so check your situation with TDLR rather than assuming an exception applies to you.

Your records are your proof. Vague or missing dates are a common reason files get questions, so keep a dated log of jobs and get signed letters from supervising contractors while they are still easy to reach.

Step 4: Buy commercial general liability insurance

Your policy must stay active at all times, not just on the day you apply. Limits depend on your class: $300,000 per occurrence, $600,000 aggregate, and $300,000 products for Class A, or $100,000, $200,000, and $100,000 for Class B. Ask your agent for a certificate that names your exact legal entity. Put renewal dates on your calendar so a lapse never happens by accident, and ask TDLR what happens if coverage lapses, since that affects your license.

Step 5: Submit the application and pay the $115 fee

Submit your application to TDLR with the $115 application fee. Have your experience records, proof of age, and insurance certificate ready before you start. The license is valid for one year, so set a renewal reminder from the day it issues. This article does not cover renewal fees or continuing requirements, so confirm those with TDLR.

Step 6: Pass the TDLR exam within one year

You must pass the TDLR exam within one year of applying. Plan your study time around that window, and confirm with TDLR how the clock works and what happens if you need more time. Exam fees and scheduling details are not covered here, so confirm them with TDLR as well.

Step 7: Register any assistants

Technicians who assist on ACR work must register with TDLR for $20 and be at least 16 years old. They must work under a licensed contractor. Do not put a helper on a job before the registration is in place, and confirm current registration rules with TDLR.

Step 8: Handle the federal and local requirements

EPA 608 refrigerant certification is a federal requirement that is separate from your TDLR license. Anyone who handles refrigerants needs it, so get certified before you work on a system. Counties do not license HVAC work, but your city may require permits for installs and replacements. Check with your city or county building department before you bid.

Step 9: Set up your state tax accounts

Texas has no state income tax and no corporate income tax. Your main state tax obligation is the franchise tax, administered by the Texas Comptroller. For the 2026 and 2027 report years, entities with total revenue at or below $2,650,000 owe no tax, but they still file the Public Information Report by May 15. Above that threshold, the rate is 0.75 percent for entities other than retail and wholesale businesses, and 0.375 percent for retail and wholesale. Texas does not require a newspaper publication notice when you form your entity.

Most businesses that sell taxable goods or services need a sales and use tax permit. The Comptroller issues it at no charge, and processing typically takes two to three weeks. HVAC jobs often include equipment and parts, so ask the Comptroller how your sales are taxed. The state sales tax rate is 6.25 percent.

Tips and Common Mistakes

• Mismatched names. If your license, insurance, Secretary of State filing, and bank account use different names, you will spend weeks fixing paperwork. Match the legal name everywhere.
• Choosing the wrong class. A Class B license does not cover a cooling system above 25 tons. Price the largest job you plan to bid before you pick a class.
• Letting insurance lapse. Set a reminder 30 days before each renewal and get updated certificates every time the policy changes.
• Counting experience you cannot document. Verbal claims do not replace dated records.
• Missing the exam window. One year goes fast when you are working full time. Schedule the exam early.
• Using a P.O. box as your registered office. The registered office must be a physical Texas street address.
• Filing a DBA in the wrong place. LLCs file with the Secretary of State. Sole proprietors file with the county clerk.
• Skipping the franchise tax report because you owe nothing. The Public Information Report is still due May 15 if you are under the threshold.
• Starting work before the paperwork is ready. Helpers, refrigerant handling, and permitted installs each have requirements. Finish them before your first job.

What Results to Expect

A complete, correct file puts your business in a position to bid on regulated ACR work. A license and proof of insurance may help with commercial customers who ask for them, and with property managers who want a documented contractor before they approve a vendor. Your actual timeline depends on your experience records, exam scheduling, and TDLR processing time, so build in a buffer. Avoid promising a start date to a customer until your license is in hand.

Next Steps and Where to Get Help

Start with the official sites. Check TDLR at tdlr.texas.gov for license requirements, the Texas Secretary of State at sos.state.tx.us (file through SOSDirect), and the Texas Comptroller at comptroller.texas.gov. The Texas Small Business Development Center Network can help you plan the business side. Use the Texas Business Licenses and Permits Guide to identify any local or specialized requirements that apply to your work.

Talk with a licensed Texas attorney about entity choice and liability, and with a CPA about franchise tax, sales tax, and your overall tax plan.

This article is informational content, not legal or tax advice. Licensing rules, fees, and deadlines change. Confirm current requirements with TDLR, the Texas Secretary of State, and the Texas Comptroller before you file, and consult qualified professionals for complex situations.