January 12, 2017
SBA Corrects Discrepancy in Small Business Joint Venture Rules
Source: JD Supra Business Advisor, Megan Connor, January 9, 2017
On December 23, 2016, the U.S. Small Business Administration (“SBA”) issued a technical correction to its July 25, 2016 final rule regarding the new mentor-protégé program for all small business concerns to address an inconsistency among the joint venture rules applicable to the SBA’s various small business programs. The SBA’s July 25, 2016 rule provided that when a joint venture is a separate legal entity, the profits of the joint venture must be split commensurate with the joint venturers’ ownership interests. As drafted, this regulation would apply equally to a populated or unpopulated joint venture as long as the joint venture was a separate legal entity.
In contrast, the SBA’s 8(a) Business Development Program (“8(a) Program”) regulations provide that in an unpopulated 8(a) joint venture, profits are to be split commensurate with the work performed by the joint venture members, not commensurate with the venturers’ ownership interests. See 13 C.F.R. § 124.513(c)(4). Thus, the SBA’s July 25, 2016 rule resulted in an inconsistency between the 8(a) Program’s joint venture rules and the rules governing joint ventures of every other type, including small businesses, service-disabled veteran-owned small business concerns (“SDVO SBC”), participants in the Historically Underutilized Business Zone (“HUBZone”) program, and participants in the women-owned small business (“WOSB”) program. READ MORE….
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