If a non-licensed individual acquires a trade business (hvac, plumbing, etc.) they often will need a management level employee to hold the license for the company to operate. In some states, that individual is also required to have equity in the business (e.g. 1% in NJ for HVAC, 10% in NJ for plumbing).
Let's say you find a licensed individual and incentivize them with equity, profit share and a high salary. They could still leave at any time...even if there were possible contractual agreements in place they would not be for long term. If that were to happen - you would lose your ability to operate until you could replace that individual with another properly licensed individual. And then there is the question of what happens with the equity? You would also need to meet equity requirements for the new hire. Even if they were happy to stay long term - you would always be beholden to that individual.
Despite all of this - I keep hearing on podcasts, on twitter and other places about non-trade corporate types buying these trade businesses. Isn't the risk of ruin to great? Do they all partner with a licensed individual before pursuing these type of acquisitions? Are there just certain states that have looser requirements? My research is based on NY, NY, CT region. Am I missing something here?
License hurdle when acquiring trade businesses
by a searcher from Pennsylvania State University
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2) In states that don't have equity requirements, I would suggest having the seller continue to qualify the business under his/her license for 2 years (or until you can get yours) as one of the contingencies for a seller note.
Problem solving will be your #1 daily task once you close on a business. Your ability to overcome closing hurdles (this is just one of many that you will face) is a good test of your problem solving ability and a potential indicator of whether or not you will be successful as an operator, IMO.