LEGAL GUIDE
Written by attorney David Allen Rose

The Department of Veteran's Affairs Publishes Final Rule on CVE Program for Small Businesses

On January 19, 2011, the Department of Veteran’s Affairs published a final rule with regard to verification of veteran-owned small business in the Certified Veteran-Owned Small Business (CVE) program. The rule basically clarified several provisions and made some course corrections that will make it easier for Veteran Small Business Owners to be successful in their small business ventures. This Rule becomes effective February 18, 2011.

The changes include:

Veterans and Service Disabled owners need not work full-time for the business anymore but need to be able to demonstrate sustained and significant time invested in the business. This allows the owner to not only work an outside job while the new business develops but allows for multiple formation of Veteran owned businesses under the same veteran in order to take advantage of tax laws, limit liability between firms and separate divisions of specialties.

The rule clarifies that the veteran owner(s) must receive 51% of the profits and that the owner’s share in the profits should continue to be commensurate with his/her ownership interest.

The rule is unchanged but clarified to allow for non-veteran employees to make more than the veteran owner if it can be demonstrated that the more highly compensated non-veteran employee helps the veteran to be successful, for instance in recruiting better, more competitive employees.

The Agency declined to allow all Veteran Businesses to verify status, stating that it will continue only to apply to the Department of Veteran’s Affairs and to small businesses thereunder.

This is merely a summation of the changes and clarifications to the rules. For a complete summary of the changes, please see the Rule itself at: http://www.federalregister.gov/articles/2011/01/19/2011-983/va-veteran-owned-small-business-verification-guidelines

Please contact a lawyer if you have any questions or would like assistance in forming a Veteran or Service Disabled Small Business or teaming arrangement. As with any advice received in a "blog-like" format, consult with competent legal authority prior to embarking on any financial venture which involves complex legal issues such as these.

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