VetCert Control Rules: What Your Operating Agreement Must Show

This page is for a veteran business owner getting ready for VetCert, the Small Business Administration (SBA) certification for veteran-owned small businesses. It covers control: what your operating agreement, bylaws or partnership agreement must show. If you have not checked whether your business qualifies, start with the VetCert guide.

Every rule here is about the qualifying veterans, the owners the application relies on. For a service-disabled veteran-owned small business (SDVOSB), they must be veterans the VA rates as service-disabled. The one exception is a spouse or permanent caregiver standing in for a veteran rated permanently and totally disabled.

SBA says APEX Accelerators can help you see whether you are eligible for small business certifications, and APEX says its guidance is no-cost.

The control trap

One place applications go wrong: the application says the veteran runs the business, but the operating agreement or bylaws say otherwise. SBA's appeals office has said the governing documents decide who controls a business.

Qualifying veterans must control both long-term decisions and day-to-day operations. The rule defines day-to-day operations as marketing, production, sales and administration.

Anyone else counts as a non-veteran here. That includes an SDVOSB co-owner who is a veteran but not service-disabled. Only the VA can change that status.

Control and blocking

A non-veteran can help manage the business and own part of it. A non-veteran cannot control it or hold the power to control it. That includes negative control: the power under the governing documents to prevent a quorum or block action by the board or veteran owners.

• LLC. At least one veteran must be a managing member, and veterans must control all decisions. The appeals office reads that literally.
• Partnership. At least one veteran must be a general partner, and veterans must control all partnership decisions.
• Corporation. Veterans must control the board. Quorum rules cannot let non-veteran directors take control. Non-voting, advisory or honorary directors do not affect control.

Votes that need a non-veteran

Veterans must meet every unanimous or supermajority voting requirement on management and daily operations, in any business structure.

In a corporation, veterans control the board when a veteran director owns all voting stock. They also do when a veteran director owns at least 51 percent, plus enough to overcome any supermajority rule. Otherwise they need a controlling number of voting directors or, where state law allows, weighted voting.

Seven matters a minority owner may keep

A minority owner may still hold a vote on seven extraordinary matters.

1. Adding a new equity owner, or raising an equity owner's investment.
2. Dissolving the company.
3. Selling the company or all its assets.
4. A merger.
5. Declaring bankruptcy.
6. Amending the governing documents to remove the power to block the first five.
7. Any other extraordinary action crafted solely to protect the minority owners' investment, not to get in the way of the majority running the business.

In Blue Skye Foods, LLC, SBA No. VSBC-442-A (September 2025), SBA denied a business whose operating agreement needed unanimous consent to change its accounting method or tax classification. The appeals office reversed. It called the seventh matter a catch-all for clauses that protect a minority owner's investment without getting in the way of the veteran's control. An SBA reviewer may still question a clause outside the first six.

In Datawize Technologies LLC, SBA No. VSBC-458-A (January 2026), the appeals office found that unanimous consent to distribute profits was not an exception. The business won anyway, because the veteran could amend the agreement at any time. Outside one rule for corporate boards, the regulation says such an unused right is not in itself control. The decision does not discuss that rule. Do not count on that route.

Outside leverage

No non-veteran may:

• Have business ties that leave the veteran unable to use independent judgment without great economic risk.
• Control the business through loans. A loan guaranty on commercially reasonable terms is fine.
• Provide critical financing, bonding or a license that lets them significantly influence the veteran's decisions.
• Be a former employer of a qualifying veteran, or its principal. That is allowed only if the business shows the tie gives no actual or potential control and serves the business's best interest.

The veteran need not hold a required license or technical skill. The veteran must have final managerial and supervisory control over those who do.

Pay and hours

A non-veteran may out-earn the veteran in the top officer job only in two cases. The business must show the pay is commercially reasonable, or that the veteran chose lower pay to benefit the business. A certified SDVOSB must report such a gap to SBA within 30 calendar days. SBA must find one of those reasons before an SDVOSB award.

A qualifying veteran generally must work full time during normal business hours. Otherwise SBA presumes a lack of control, unless the business shows the veteran still has final control over long-term decisions and daily management. SBA's FAQ allows a second job if the veteran shows it does not get in the way.

After certification, outside work must be reported to SBA with its nature and expected length. The veteran must show it will not prevent control.

If a Guard or Reserve owner is called to active duty, the business can name people in writing to control it during that duty. It must keep those records and give them to SBA. The call is also a change to report, during review and after certification.

Ownership with strings attached

Ownership cannot come with strings. That means no conditions, voting trusts, limits on or transfers of voting rights, or executory agreements, which are agreements still to be carried out. It also means no other arrangement that could pass ownership benefits to someone else.

Three things are allowed:

• Benefits passing only at death or incapacity.
• Pledging ownership as loan collateral on normal commercial terms, including seller financing, if the owner keeps control unless the terms are broken.
• A right of first refusal on normal commercial terms.

Unused options held by non-veterans count as if used. That includes rights to convert non-voting stock or debt into voting stock. The one exception is options held by a licensed small business investment company. Veterans still need 51 percent. Their own unused options are ignored.

Veterans must be entitled to at least 51 percent of profit distributions, in step with what they own. They must get full value for their shares if sold. On dissolution, they must get at least 51 percent of retained earnings plus the full unencumbered value of their shares. Check any clause that pays investors first or caps what veterans receive.

Paperwork that does not agree

• Out-of-date documents. The business must be eligible on the day SBA decides. It must report ownership or control changes during review.
• Documents that conflict. If SBA cannot tell whether a requirement is met, it will decline.
• Knowingly false information. SBA denies, even if the true facts would have qualified.

The business carries the burden of proof. Fixing a clause after a denial may not help an appeal, as VetCert denied explains. So before you apply, check your governing documents against every pattern here. Change any clause that gives a non-veteran control or a blocking vote over running the business, and make every document agree. VetCert documents covers what to gather and how to apply.

SBA's VetCert FAQ points applicants to free business counseling, including at Veterans Business Outreach Centers.

This site teaches how VetCert works. It does not apply for anyone, and nothing here promises what SBA decides.