Question 1

Can an LLC qualify as an SDVOSB?

Accepted Answer

Yes. Limited Liability Companies (LLCs) are a common business structure for SDVOSBs. The service-disabled veteran must hold at least 51% of the membership interests and must serve as the Managing Member with full control over operations. Operating agreements must not grant non-veteran members rights that undermine veteran control, such as supermajority voting requirements for routine decisions.

Question 2

What ownership percentage is required for SDVOSB status?

Accepted Answer

At least 51% of the business must be unconditionally owned by one or more service-disabled veterans. Ownership must be direct — ownership through an intervening entity generally does not count unless each layer of the structure is also more than 50% owned by service-disabled veterans. The 51% threshold applies to all economic interests including profits, losses, and liquidation rights.

Question 3

What control requirements must an SDVOSB meet?

Accepted Answer

The service-disabled veteran(s) must control the management and daily business operations of the firm. Control means the veteran must hold the highest officer position (e.g., CEO, President, or Managing Member), manage day-to-day operations, and possess the requisite managerial experience to run the business. The veteran cannot be a mere figurehead — non-veterans cannot run daily operations even if the veteran is the majority owner.

Question 4

What are negative control provisions and why do they matter for SDVOSBs?

Accepted Answer

Negative control provisions are contractual rights that allow a minority owner to block or veto business decisions, effectively giving them control despite owning less than 51%. Examples include supermajority voting requirements for routine decisions, rights to approve or block key hires, or veto power over day-to-day contracts. If non-veteran owners hold such rights, the business fails the control test and cannot qualify as an SDVOSB even if veterans own 51%.

Can an LLC qualify as an SDVOSB?

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