Question 1

Can an SDVOSB have multiple owners, including non-veterans?

Accepted Answer

Yes. An SDVOSB can have non-veteran owners as long as service-disabled veterans collectively own at least 51% and maintain full control. Non-veteran minority owners (up to 49%) are permitted. However, non-veteran owners cannot have negative control provisions — contractual rights that effectively give them veto power over major business decisions can jeopardize SDVOSB status.

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 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%.

Question 4

Can operating agreements require supermajority votes for major decisions?

Accepted Answer

Supermajority voting requirements for extraordinary business decisions (mergers, dissolution, sale of all assets) are generally permissible and do not jeopardize SDVOSB status. However, requiring supermajority votes for ordinary business operations — such as entering contracts, hiring key employees, or day-to-day management decisions — constitutes negative control and will disqualify the firm. The line is between protecting investor rights vs. controlling operations.

Can an SDVOSB have multiple owners, including non-veterans?

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